Minnesota Center for Fiscal Excellence - Side-by-Side

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No. 13-08 | House-Senate Side-by-Side

This publication is for MCFE members only. Please respect the privileges of MCFE membership by sharing this only with colleagues in your company (for business members) and immediate family (for individual members).

If you needed any reminding about the difficulties of passing a tax bill with elements of reform or additional revenues, Monday’s votes on the Senate omnibus tax bill should have done it. The bill failed on its initial vote with seven DFLers – Sens. Bonoff, Clausen, Franzen, Hoffman, Jensen, Kent, and Scalze – voting “no” and one Republican – Sen. Senjem – voting “yes”. These seven DFLers generally share some common traits – all in their first term (except Sen. Bonoff), representing suburban areas (except Sen. Jensen) which could be considered swing districts. After a brief recess, procedural motions and more debate, the bill finally passed on 35-31 vote with Sens. Clausen and Hoffman changing their votes and Sen. Ann Rest voting this time around.

The House vote was far more predictable, but still with four DFLers – Reps. Halverson, Radinovich, Rosenthal, and Selcer (again a largely suburban/first term/competitive district group) opposing final passage in the 69-64 vote. With both houses now having passed their omnibus tax bills the tax conference committee is imminent.

Now onto the bills themselves. Our March-April edition of Fiscal Focus compares and contrasts the various tax proposals, so we won’t spend too much time on that here. Suffice it to say that the items we think are most likely to find their way into the final package are: increased income taxes in some form, additional aids to local governments, repeal of foreign operating corporations, and higher taxes on cigarettes. Whether the House’s temporary surcharge on high incomes, the House’s enhancement of the circuitbreaker program, or the Senate’s base-broadening rate-lowering work in the sales and corporate tax areas will make it into the final proposal remain to be seen; but these are far less likely to be acceptable to all the players involved.

This issue of the Spotlight is an unofficial side-by-side summary comparison of the two bills, and is similar to the one that will be prepared by House and Senate non-partisan staff. Ours is designed, however, to more of an “at a glance” summary – if 26 pages can qualify as such. We quote at times extensively from the House and Senate non-partisan staff summaries of their respective omnibus tax bills, many times without quote marks. MCFE is responsible for all errors of interpretation in this summary; feel free to contact us with any concerns.

Our next edition of the Spotlight will come out after legislators have adopted the final tax bill. Our members-only blog will provide updates on the progress of the tax conference committee and additional information such as links to the text of the House and Senate bills, the official non-partisan side-by-side (for those of you who need even-greater detail), and fiscal comparisons of the two proposals. Please contact our office if you need help registering on the website.

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THE OMNIBUS TAX BILLS, 2013 (UNOFFICIAL)

HOUSE FILE 0677 AND SENATE FILE 0552

House Article 1: One-Time Provisions Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 1: One-Time Provisions Article 7: Sales & Use Taxes; Local Sales Taxes 1, 6, 11

Income surcharge. Imposes a 4% surcharge on taxable net income above $500,000 for married-joint, single, and head of household filers and above $250,000 for all other filers for tax years 2013 and 2014. Reduces the surcharge if the Nov. 2013 or Feb. 2014 economic forecasts project an unrestricted general fund balance by such an amount that eliminates the projected balance.

This would set the surcharge reduction as the fifth priority use for any unrestricted general fund balance, ahead of only the repayment to the state airports fund.

No comparable provision.

2-3 School aids shift and property tax recognition shift repayment. Repays the school aids shift and restores the school district current year aid payment shift percentage from 60% to 90%. Eliminates the property tax recognition shift.


4-5 Section 179 expensing. Conforms the individual and corporate franchise taxes to increased section 179 expensing for tax year 2013 only.


7-10 Sales tax; capital equipment exemption. Converts the exemption to an upfront exemption.

29 Similar, but for purchases made between 7/1/14 and 6/30/15 the upfront exemption is only available to businesses that: employed 80 or fewer employees during 2013 and; which were not 20% or more owned by a business which itself employed more than 80 employees during 2013.

12 Appropriations. Appropriates money as follows: $262.2 million to restore the education aid

payment to a 90%/10% split $569.9 million to eliminate the property tax

recognition shift $21.7 million for additional education aids

related to the eliminating the property tax recognition shift


House Article 2: Homestead Credit Refund and Renter Property Tax Refund Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 2: Homestead Credit Refund and Renter Property Tax Refund

Article 2: Property Tax

1 Income, definitions. Changes the definition of income as used in the refund programs as follows: Limits the addition for IRA contributions to the

extent the sum of the amounts exceeds the retirement base amount for the claimant and spouse

Includes distributions received by the claimant or spouse from a traditional or Roth style retirement account or plan, to the extent not included in federal adjusted gross income

Converts the reference for the federal tuition deduction add-back from Minnesota Statutes to the Internal Revenue Code


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Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 2: Homestead Credit Refund and

Renter Property Tax Refund Article 2: Property Tax

2, 4 Homestead credit refund. Renames the homestead PTR the “homestead credit refund”. Reduces the threshold percentage for filers with $19,500 to $105,300 in income in various amounts, with the maximum falling from 3.5% to 2.5%. Updates the maximum refund and household income amounts to what current law projects for refunds based on payable 2014 taxes. Reduces the number of income ranges from 27 to 23. Sets the base year for inflation adjustments to 2013.

An “apples-to-apples” comparison of the current and proposed refund programs is difficult because the number of income ranges falls in the proposed refund program from 27 to 23.


3-4 Renters property tax refund. Reduces the threshold percentage for filers with income between $31,030 and $57,170 in various amounts, with the maximum falling from 3.5% to 2.0%. Increases the maximum refund for all income ranges, increasing at the lowest income ranges from $1,620 to $2,000. Reduces the number of income ranges from 29 to 22. Sets the base year for inflation adjustments to 2013.

An “apples-to-apples” comparison of the current and proposed refund programs in the House bill is difficult because the number of income ranges falls in the proposed refund program from 29to 22.

3-4 Renters property tax refund. Generally reduces filers’ copay share by five percentage points. Increases the maximum refund for all income ranges, with the refund for the lowest income ranges increasing from $1,620 to $1,790. Sets the base year for inflation adjustments to 2013.

5 Notification of potential eligibility. Requires that Revenue notify homeowners it determines may be eligible for a homestead credit refund based on available property tax and income information about their potential eligibility.


No comparable provision. The proposal would have affected the subtraction for claims against rent paid in 2012 as follows:

# of Depend-

ents

Subtraction

Current Proposed

1 $5,320 $5,700 2 $10,260 $11,020 3 $14,820 $15,960 4 $19,000 $20,520

5 or more $22,800 $24,700

24 Renters property tax refund; income. Increases the income subtraction, the size of which is contingent upon the number of dependents the filer claims, by 10% of the base exemption amount (currently $3,800) for the filer’s first through fifth dependents.

House Article 3: Property Tax Aids and Credits Sec House Tax Bill (HF 0677) Comments Art:

SecSenate Tax Bill (SF 0552)

Article 3: Property Tax Aids and Credits Article 1: Aids and Credits (unless noted) Article 2: Property Tax

1, 6 Surcharge on homeowners and auto policies. Imposes an annual $5 surcharge on each homeowners and automobile insurance policy issued or renewed in Minnesota. Dedicates the homeowners insurance surcharge revenue to supplement firefighter-related pension financing and the auto insurance surcharge revenue to supplement police-related pension financing. Terminates the surcharge when the PERA Police and Fire and MSRS State Patrol Plans reach 90% funded on an actuarial basis.

1 Local pension aids. Appropriates $745,000 in FY 2015 and thereafter for pension aids as follows: $130,065 for PERA Police and Fire $64,935 to municipalities whose firefighters

are covered by PERA $550,000 to municipalities with volunteer

firefighter retirement plans Appropriates $1.55 million in FY 2015 and thereafter for pension aids as follows: 1/3 as supplemental polic estate aids 2/3 to MSRS –State Patrol and PERA Police

and Fire Terminates the aids at the earlier of 12/31/2020 or

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Sec House Tax Bill (HF 0677) Comments Art: Sec

Senate Tax Bill (SF 0552)

Article 3: Property Tax Aids and Credits Article 1: Aids and Credits (unless noted) Article 2: Property Tax the December 31st following the actuarial valuation date when PERA Police and Fire and MSRS State Patrol Plans reach 90% funded on an market value of assets basis.

2 Disparity reduction credit. Increases the credit amount so that it reduces the taxes on eligible parcels down to 2.0% instead of the current 2.3%.

2: 17 Disparity reduction credit. Similar, but modifies the credit so that it reduces the taxes on eligible parcels to 1.9%.

3-5 Sustainable forests. Makes the following changes to the Sustainable Forest Incentive Act program: Excludes lands subject to easements funded

through the Outdoor Heritage Fund or similar easements conveyed to governmental or nonprofit entities

Requires landowners to include property tax statements with their annual certifications

Caps payments for any parcel at no more than one-half the property taxes payable

2: 27-30, 48

Sustainable forests. Makes the following changes to the Sustainable Forest Incentive Act program: Excludes lands subject to easements funded

through the Outdoor Heritage Fund or similar easements conveyed to governmental or nonprofit entities

Requires landowners enrolling more than 1,920 to allow motorized access on established and maintained roads and trails unless closed for a stated number of reasons

Authorizes participants to withdraw if changes in the payment formula reduce payments

Changes the incentive payment from $7.00 per acre to $7.25 per acre and eliminates the $100,000 per Social Security number or state or federal business tax i.d. number limitation on annual payments.

Allows landowners who ended participation in the program as provided in the 2011 Special Session tax bill to reenroll.

7-14 Local government aid formula, revision. Replaces the current LGA formula with one where the definition of city revenue need differs as follows based on city population: Cities under 2,500 – need is set between $410

and $630 per capita, based on city size Cities between 2,500 and 9,999 – need is based

on share of pre-1940 housing, household size, and the percentage decline from the highest census population as of or after the 1970 Census

Cities of 10,000 or more – need is based on share of pre-1940 housing, share of housing built between 1940 and 1970, jobs per capita, and an adjustment if the average population density is less than 150 per square mile

2-7; 9-10

Virtually identical.

15 Local government aid, certified aid adjustments. Makes the following adjustments to the LGA formula: Provides the city of Warroad an extra $150,000

per year for the next five years Adjusts the formula for three cities that were

given temporary aid increases that end in 2013 or 2014 under current law: (Newport - $75,000; Crookston - $100,000; and Mendota $25,000)

11 Local government aid, certified aid adjustments. Includes the House provisions plus a base adjustment of $160,000 for the city of Mahnomen for aids payable 2013 and thereafter.

16, Local government aid, payment dates. Directs that cities located in areas deemed disasters in April 2013 receive both LGA payments in July 2013.


17, 19 Local government aid, appropriation. Increases 12 Local government aid, appropriation. Increases

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Sec House Tax Bill (HF 0677) Comments Art: Sec

Senate Tax Bill (SF 0552)

Article 3: Property Tax Aids and Credits Article 1: Aids and Credits (unless noted) Article 2: Property Tax

LGA for 2014 by $80 million (to $506.4 million). Adjusts the appropriation annually by the change in the IPD for state and local government purchases beginning in 2015, with a minimum increase of 2.5% and a maximum of 5.0%.

the LGA appropriation for 2014 by $80 million (to $506.4 million) but does not index the appropriation for future years.

18 County program aid, appropriation. Increases the CPA appropriation from by $30 million (from $165.7 to $195.7 million) for 2014 and thereafter.

13 County program aid, appropriation. Increases the CPA appropriation from by $40 million (from $165.7 to $205.7 million) for 2014 and thereafter.

20 Repealer. Repeals various obsolete or unnecessary LGA provisions, along with supplemental aid payments to Mahnomen County, the city of Mahnomen, and the Mahnomen School District.

27 Repealer. Repeals various obsolete or unnecessary LGA provisions, but not the supplemental aid payments to jurisdictions in Mahnomen County.

No comparable provision. 8, 14 Local government aid; townships. Reestablishes a formula for providing local government aid to townships and appropriates $5 million annually for such aid, effective calendar year 2014.

No comparable provision. These are some of the recommendations from the PILT advisory group.

15-25 PILT payments for natural resource lands. Creates three new classes of natural resource lands: military game refuge, transportation wetland, and wildlife management land. Creates new payment rates and simplifies existing ones. Directs that such land be appraised every six years and that the original appraisal be set to the purchase price. Creates a distribution formula for revenues from the newly-created classes of natural resource lands.

No comparable provision. The House bill eliminates these payments altogether.

26 Property tax reimbursement; Mahnomen County; county, city, and school district. Doubles the annual aid payments made to taxing jurisdictions in Mahnomen County as compensation for the loss of property tax revenue resulting from the trust conversion application of the Shooting Star Casino as follows: Mahnomen County to $900,000; city of Mahnomen $160,000; and Mahnomen School District to $140,000.

House Article 4: Property Taxes Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 4: Property Taxes Article 2: Property Tax (unless noted) Article 4: Special Taxes

1-5 Board of Water and Soil Resources. Authorizes counties, municipalities, and townships to levy for amounts needed to implement a comprehensive watershed management plan. Includes other BWSR-related provisions.

1-5 Same.

6-7 Manufactured homes. Directs that manufactured homes be considered as dealer inventory if the home is: listed as inventory and held by a licensed or limited dealer; unoccupied and not available for rent; may or may not be permanently connected to utilities when located in a manufactured park; and may or may not be temporarily connected to utilities when located at a dealer’s sales center.

6-7 Manufactured homes. Virtually identical, except that the exemption is only allowed for up to five assessment years after the data a home is initially claimed as dealer inventory.

8 Economic development, public purpose. Increases the allowable holding period for exempt


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Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 4: Property Taxes Article 2: Property Tax (unless noted)

Article 4: Special Taxes property held for economic development for cities between 5,000 and 20,000 outside the metro area from nine to fifteen years.

9 10 11 12

Exemptions: C/I property in Minneapolis owned by a

federally recognized Indian tribe and used for either tribal government activities or services to members of the tribe from the property tax through payable 2024. Limits the exemption to no more than two contiguous parcels and 20,000 square feet in the aggregate.

Target Center, except for any property used for purposes different from those necessary to the provision and operation of the arena, including restaurants open for general business more than 200 days per year.

City-owned baseball park for the Saint Paul Saints, except for any property used for purposes different from those necessary to the provision and operation of the ballpark.

Attached machinery and personal property for described electric generation facilities planned for the cities of Anoka, Chaska, North St. Paul, and Shakopee.

9 10 44 43 11

Exemptions: Personal property used for pollution control that

is not required to be installed or required by a standard, rule, or by the MPCA

Exemption for Indian tribe-owned C/I property in Minneapolis that is virtually identical to that found in House Article 4, section 9

Similar Target Center exemption as in House Article 4, section 10, except that it does not directly reference restaurants open for general business more than 200 days per year.

Exemption for St. Paul Saints ballpark that is virtually identical to the language in House Article 4, section 11.

Same electric generation facility attached machinery and personal property as in House Article 4, section 12.

13 Valuation limit for class 4d property. Limits the taxable valuation for class 4d property to $100,000 per dwelling unit for assessment year 2013. Adjusts the limit annually based on the average statewide change in estimated market value of class 4a and 4d property, excluding the impact of new construction, rounded to the nearest $1,000.

Class 4d property is low-income rental housing.

16 Determination of property tax maximum. Limits the maximum property taxes on class 4d property to 10% of the maximum annual rent the owner may charge, assuming all units are occupied at all times.

14-16 Federal active service exception; due dates. Establishes a six-month grace period on the due dates for property tax payments in cases of homestead properties owned by individuals who are on federal active service.


17-18 Hennepin and Ramsey Counties; mortgage registry and deed taxes. Reinstates these counties’ authority to impose a mortgage registry tax equal to 0.01% of the principal debt and a deed tax equal to 0.01% of the consideration on a permanent basis. Effective 7/1/13

These counties’ authority to impose these taxes expired January 1, 2013.

Art 4, Sec 7-8; 32-33

Similar. Except that the authority is extended only through January 1, 2023.

19 Cook-Orr Hospital District; levy authority. Allows the district to levy for attached and portable equipment for use in and for the ambulances operated by the Cook ambulance service and the Orr ambulance service; and for repair and replacement parts for maintenance and repair of those same ambulances. Prohibits the district from levying for operational expenses. Directs that levy monies for ambulance purposes be passed along in equal shares to the two ambulance services.

36 Same.

20 Cemetery levy for Sawyer by Carlton County. Authorizes Carlton County to levy in and for the unorganized territory of Sawyer for cemetery purposes.

37 Same.

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Article 4: Special Taxes 21 Northwest Minnesota Multicounty Housing and

Redevelopment Authority; levy authority. Authorizes the Authority to levy up to 25% of the statutory HRA levy without approval of its constituent cities or counties with a 2/3 vote until taxes payable 2018.

38 Same.

22 Agricultural homesteads, Marshall county. Converts from temporary (expiring in 2013) to permanent the provisions in law applying to Marshall county which allow an owner living off of a farm as a result of the March 2009 flooding to claim the property as an agricultural homestead

41 Agricultural homesteads, Marshall county. Extends the temporary provisions, which expire in 2013, by five years so that they would now expire in 2018.

23 Minneapolis and St. Paul; entertainment facilities coordination. Requires the two cities to establish a joint governing structure to coordinate and provide for joint marketing, promotion, and scheduling of conventions and events at the Target Center and the Xcel Energy Center.


24 Moratorium on changes in assessment practice. Prohibits assessors from deviating from current practices or policies used generally in assessing or determining the taxable status of property used in the production of biofuels, wine, beer, distilled beverages, or dairy products. Further prohibits changes to the taxable status of any existing property involved in the industrial processes identified above unless made to correct an error or because of a change in the use of the property. Effective for assessment year 2013.

46 Similar. Except that the moratorium is in effect for assessment years 2013 and 2014.

25 Study and report. Requires Revenue to study the assessment of property used in biofuels production and similar types of equipment. Requires a report.

47 Similar. Except that the proposal requires stakeholder involvement and provides a list of items that must be included.

26 Reimbursement for property tax abatements. Provides state reimbursement of up to $400,000 to local governments in Hennepin County for the property tax disaster abatements granted in the 2011 Special Session tax bill for taxes payable in 2011 to homes damaged by the 5/22/11 tornadoes.

42 Reimbursement for property tax abatements. Similar, except that the FY 2014 appropriation is fixed at $336,000.

27 Iron Range Fiscal Disparities Study. Requires Revenue to study the program and report to the legislature by 2/1/15. Provides a set of issues that the study must analyze. Adds $75,000 to the areawide levy to pay for the study.


28 Repealer. The 6/30/13 sunset on cities’ authority to

establish new special service districts or housing improvement areas

The sunset for the Hennepin and Ramsey County deed and mortgage registry taxes that were reimposed in sections 17-18

Makes this authority for cities permanent.

51 Repealer. Repeals the 95/5 split in the statewide property

tax between C/I and cabin properties.

No comparable provision. 8 Assessor accreditation. Requires assessors to be licensed as an accredited assessor by the Minnesota State Board of Assessors by July 1, 2017.

No comparable provision. 9 Personal property used for pollution control. Exempts from property tax for personal property that is not required to be installed or required by a

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Article 4: Special Taxes standard, rule, criteria, guideline, policy, or order of the Minnesota Pollution Control Agency.

No comparable provision. 13 Conservation property tax valuation. Specifies that the current law allowing assessment to reduce the value of real property subject to a conservation restriction or easement applies only to riparian buffers along lakes, rivers, and streams that are used or water quantity or quality control or parcels of land of more than 1,920 acres that allow public motorized access.

No comparable provision. 14-15 Agricultural homesteads; special provisions. Modifies agricultural homestead determinations by removing several special provisions which granted homestead status to property owned by entities or personal not actually living on the farm. Also eliminates obsolete language.

No comparable provision. The payable 2013 rate is 525.23 mills – the payable 2002 rate was 579.33 mills.

18-19 Statewide property tax. Resets the statewide property tax rate for C/I property to the payable 2002 rate and imposes the tax on public utility electric generation attached machinery.

No comparable provision. 20-23 Delinquent property taxes. Changes the procedure for delinquent property taxes by modifying provisions related to confessions of judgment, installment payments, and redemption periods.

No comparable provision. 31-32 Deadline for special service district under general law. Extends the sunset on cities’ authority to establish new special service districts or housing improvement areas by five years, to 06/30/18.

No comparable provision. 33-34 Special assessments; state property. Requires a city or town to determine the amount of special assessment on property owned by the state or other public body as if it were privately owned. Allows the public owner to negotiate a smaller payment. Appropriates $5 million annually, beginning FY 2014, for grants to reimburse public bodies for the assessments this proposal would require.

No comparable provision. 35 Bloomington computation; fiscal disparities. Adds $ million to the city of Bloomington’s areawide fiscal disparities for payable 2014 through payable 2023.

No comparable provision. 39-40 Cloquet Area Fire and Ambulance Special Taxing District. Allows local governments that are not contiguous to the city of Cloquet or Perch Lake Township to join the district. Provides for different maximum tax rates for areas within the district that receive ambulance services only and those that receive both ambulance and fire services.

No comparable provision. 45 Public entertainment facility; construction manager at risk. Allows Minneapolis to contract for work on the Target Center under either the design-bid-build model, the construction manager at risk model, or some combination of the two.

No comparable provision. 49 Property tax savings report. Requires cities and counties to report their 2012 sales and use tax

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Article 4: Special Taxes liabilities with their T-n-T statements. Further requires cities and counties to discuss the savings resulting from the exemption proposed in Article 5.

No comparable provision. 50 Metropolitan fiscal disparities working group. Requires Revenue to convene a fiscal disparities working group of interested individuals to study the issue and make recommendation by 02/01/14.

House Article 5: Special Taxes Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 5: Special Taxes Article 4: Special Taxes (except where noted) 2 Sports memorabilia gross receipts tax. Imposes

a 10% tax on the gross revenues of sports memorabilia sales.

9 Sports memorabilia gross receipts tax. Imposes a 13% tax on the gross revenues of sports memorabilia sales. Dedicates 5% of the proceeds to youth sports.

3-5, 15

Cigarette and tobacco taxes, definitions. Modifies the definition of “cigarette” to include “little cigars” and creates a definition for the term ‘”moist snuff”.

16-19, 28

Cigarette and tobacco taxes, definitions. Creates definitions in the cigarette and tobacco tax lexicon for “little cigar”, “moist snuff”, and premium cigar”. Also modifies the definition of “tobacco products distributor” to include premiums cigar distributors and “tobacco products” to include premium cigars.

6-11 Cigarette and tobacco taxes, rates. Increases the cigarette excise tax from $0.48 to $2.83 per pack and indexes it to the annual changes Revenue makes in the cigarette sales tax. Increases the excise tax on other tobacco products from 35% to 95% of the wholesale sales price of the tobacco product and sets a minimum tax on each container of moist snuff. Increases the in-lieu nonsettlement fee from $0.35 to $0.50 per pack. Applies the constitutionally-approved 0.375% sales tax to cigarettes.

20-27 Cigarette and tobacco taxes, rates. Increases the cigarette excise tax from $0.48 to $2.17 per pack and indexes it to the annual changes Revenue makes in the cigarette sales tax. Increases the excise tax on other tobacco products from 35% to 90% of the wholesale sales price of the tobacco product and sets a minimum tax on each container of moist snuff and on little cigars. Imposes a tax on premium cigar distributors equal to the lesser of 70% of the wholesale price or 50 cents per cigar. Increases the in-lieu nonsettlement fee from $0.35 to $0.50 per pack. Applies the constitutionally-approved 0.375% sales tax to cigarettes.

12 Wine and liquor excise tax. Increases the excise tax on wine and liquor as follows:

Beverage Type Current

Rate Proposed

Rate Distilled spirits $1.33/liter $2.91/liter Wine ≤ 14% alcohol 8¢/liter 55¢/liter Wine > 14% and ≤ 21% alcohol

25¢/liter 72¢/liter

Wine > 21% an ≤ 24% alcohol


Wine > 24% alcohol 93¢/liter 1.42¢/liter Sparkling wine 48¢/liter 95¢/liter Cider 4¢/liter 51¢/liter Low-alcohol dairy cocktails



13 Small winery tax credit. Creates a nonrefundable tax credit for wineries producing less than 100,000 gallons of wine annually equal to $2.08 per gallon on 50,000 gallons sold in any fiscal year.

Creates a maximum credit of $104,000.


14 Beer excise tax. Modifies the tax on fermented Creates a maximum credit of Art 5, Brewers credit. Increases the manufacturing

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Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 5: Special Taxes Article 4: Special Taxes (except where noted)

malt beverages (beer) as follows:

Beverage Type Current

Rate Proposed

Rate ≤ 3.2% alcohol $2.40/barrel $25.55/barrel > 3.2% alcohol $4.60/barrel $27.75/barrel

Increases the brewers' credit from $4.60 to $27.75 per barrel; increases the maximum number of barrels against which the credit may be claimed from 25,000 to 50,000; increases the maximum amount of the credit accordingly; and increases the manufacturing threshold above which a brewer may not qualify for the credit from 100,000 to 200,000.

$1,056,500. Sec 38 threshold above which a brewer may not qualify for the credit from 100,000 to 250,000.

16 Cigarette and tobacco taxes, floor stocks tax. Imposes a floor stocks tax of $1.60 per pack of cigarettes on merchandise held as of July 1, 2013.

16 Cigarette and tobacco taxes, floor stocks tax. Imposes a floor stocks tax of $0.94 per pack of cigarettes on merchandise held as of July 1, 2013.

17 Cigarette and tobacco taxes, interim sales tax rate. Directs Revenue to adjust the weighted average retail price of a pack of cigarettes on July 1, 2013 to reflect the price changes the enactment of this proposal would cause.


18 Tobacco tax collection report. Directs Revenue to report to the legislature on the tobacco tax collection system, including recommendations to improve compliance.

49 Same.

19 Repealer. Repeals the health impact fee of $0.75 per pack of cigarettes and 35% of the whole price on tobacco products and the health care access fund.

50 Repealer. Repeals the health impact fee of $0.75 per pack of cigarettes and 35% of the whole price on tobacco products; the provisions relating to Minnesota’s participation in the Multistate Tax Compact; and the health care access fund.

No comparable provision. 5 Commissioner of Revenue; powers and duties. Authorizes Revenue to participate in audits performed by the Multistate Tax Commission.

No comparable provision. 10 Jet fuel and special fuels tax. Increases the excise tax from a graduated rate ranging from 0.5 cents to 5 cents depending on the volume of fuel purchased to a flat 15 cents/gallon.

No comparable provision. 12 Exemptions. Exempts parts and equipment needed to repair, maintain, upgrade, or improve certain aircraft, and the associated installation charges, from the general sales tax.

No comparable provision. 13 Deposit in state airports fund. Diverts sales and use tax revenues from the sale of aircraft to the state airports fund, effective 07/01/2014.

No comparable provision. 14-15 Gross receipts tax; paper pull-tabs. Imposes a 9% tax on the gross receipts of paper pull-tabs, less prizes paid, on organizations conducting lawful gambling in a location where at least 50% of annual gross receipts come from paper bingo. Exempts paper pull-tab receipts in these locations from the combined net receipts tax.

No comparable provision. 29 Exemption; 501(c)(3) organizations. Exempts a 501(c)(3) organization from registering with the Gambling Control Board if it awards less than $50,000 in raffle prizes at one event during a calendar year.



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 5: Special Taxes Article 4: Special Taxes (except where noted) No comparable provision. 30 Aircraft; in lieu tax. Modifies the aircraft

registration tax from a 1% rate on value with a maximum of 25% of the tax computed on the original base price or $50 to a tax based on a sliding scale relative to aircraft’s base price ranging from a minimum of $100 at value of under $500,000 to a maximum of $75,000 at value of $40 million and over. Effective 07/01/14.

No comparable provision. 46 Taxes and fees paid by Indians and Indian tribes. Requires Revenue to recompute the cigarette tax refunds under the agreement authority in current law to refund sales or excise taxes paid by Indian tribes to the state, due to the repeal of the health impact fee.

No comparable provision. 47 Report required. Requires Transportation, with Revenue, to report on cash flows in and out of the State Airports Fund to the legislature.

No comparable provision. 48 ARMER grants. Appropriates $1.5 million in FY 2014 and 2015 only to reimburse counties for the sales tax costs associated with upgrading their public safety radio systems prior to 1/1/2013.

House Article 6: Individual Income and Corporate Franchise Taxes Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 6: Individual Income and Corporate Franchise Taxes

Article 5: Individual Income and Corporate Franchise Taxes

1 Angel credit; definitions. Defines “liquidation event” as a conversion of qualified investment for cash, cash and other consideration, or any other form of equity or debt instrument.

2 Angel credit; definitions. Includes the House provision along with a definition of “qualified greater Minnesota business”.

2 Angel credit; qualifying small business. Directs that businesses in operation for between 10 and 20 years that are engaged in the research, development, or production of pharmaceuticals or medical devices for which FDA approval is required for use in the treatment or diagnosis of a disease or condition are “small businesses”. Imposes the following additional restrictions for qualifying businesses: that they have not issued securities traded on a public exchange; that they not issue publically traded securities within 180 days after the date on which a qualifying investment was made; and that they not have a liquidation event within 180 days after that date on which the qualified investment was made.

1 3 Angel credit; qualifying small business. Includes the House provisions along with a definition of “qualified greater Minnesota business”.

3 Angel credit; data privacy. Directs that the mailing address, telephone number, e-mail address, contact person’s name, and industry type of business that receive investments qualifying for the credit are public data for purposes for the Data Practices Act.


4, 16, 38

Tax administration provision update. Adopts federal tax administration provisions made between 4/14/2011, and 1/3/2013 that Minnesota references for state tax administration purposes under chapter 289A and for purposes of the property tax refund.


6, 13, 36

Foreign operating corporations. Eliminates the current FOC regime and certain obsolete language.

10, 12 Similar. Except that it does not address the non-FOC-related obsolete language.



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 6: Individual Income and Corporate

Franchise Taxes Article 5: Individual Income and Corporate

Franchise Taxes 8-9 Domestic corporation; definition. Deems that the

following types of corporations are domestic corporations: Those incorporated in a tax haven Those not incorporated in a tax haven but both

doing enough business in a tax haven to be taxed there and having 20% of its income attributable to the tax haven

Those with 20% or more of the average of their property, payroll, and sales in the United States or that derives 20% or more of their income from domestic sources

Foreign entities, foreign partnerships, or other foreign entities that are taxed under federal law as partnerships or disregarded entities, of their income is required to be included in federal taxable income

Provides a list of foreign jurisdictions deemed to be tax havens unless they enter into a tax treaty or other agreement with the U.S. that provides for the exchange of information needed to enforce tax law.

The legislation provides a list of foreign countries that the OECD and the IRS have publicly identified as tax havens.


10 Federal taxable income definition update; tax year 2013 only. Adopts most of the federal changes to taxable income as of the effective date of the following federal laws: The American Taxpayer Relief Act of 2012,

Public Law 112-240, enacted 01/02/2013 The following changes were not adopted: Increased bonus depreciation The reinstated and modified limit on itemized

deductions and phaseout of exemptions

The House Research summary of HF 0677 has more information on the “nuts and bolts” of the federal laws to which Minnesota would conform.


11 Individuals; additions to taxable income. Requires charitable contributions be added back

when calculating Minnesota taxable income, up to the amount that total itemized deductions exceed the standard deduction.

Conforms Minnesota law to the federal standard deduction for married-joint filers (eliminating the need for an add-back to Minnesota taxable income).

Eliminates various obsolete language


12 Individuals; subtractions from taxable income. Eliminates the charitable contribution subtraction

for nonitemizers Eliminates the subtraction for foreign

subnational taxes in excess of the federal foreign tax credit

Allows filers to subtract the amount of any itemized deductions that are limited by the federal government

Allows filers to subtract the amount of the phase-out of personal exemptions that are limited by the federal government

Allows filers to subtract expenditures made for railroad track maintenance by shortline railroads that qualify for a federal tax credit, in an amount

11 Individuals; subtractions from taxable income. Expenditures for railroad track maintenance by

shortline railroads that qualify for a federal tax credit, in an amount equal to the credit

The previous year’s average dental provider’s reimbursement from the Minnesota medical assistance program times the dental provider’s number of patients enrolled in the program, to a maximum of $25,000.





Franchise Taxes equal to the credit

14 Corporations; subtractions from taxable income. Reduces the subtraction for foreign royalties

from 80% to 50% Expenditures for railroad track maintenance by


Eliminates other obsolete language

13 Corporations; subtractions from taxable income. Expenditures for railroad track maintenance by


The previous year’s average dental provider’s reimbursement from the Minnesota medical assistance program times the dental provider’s number of patients enrolled in the program, to a maximum of $25,000.

18-19 Individuals; brackets and rates. Modifies the brackets and rates for individual filers as follows:

Income Brackets Tax Rates Current Proposed Current Proposed

Married-Joint Filers $0- $35,480 $0- $31,650 5.35% 5.35%

$35,481- $140,960

$31,651- $130,000

7.05% 7.05%

$140,961+ $130,001- $400,000

7.85% 7.85%

N.A. $400,001+ 7.85% 8.49% Heads of Household Filers

$0- $29,880 $0-$26,650 5.35% 5.35% $29,881- $120,070

$26,651- $110,700

7.05% 7.05%

$120,071+ $110,701- $340,700

7.85% 7.85%

N.A. $340,701+ 7.85% 8.49% Single Filers

$0- $24,270 $0-$21,650 5.35% 5.35% $24,271- $79,730

$21,651- $73,500

7.05% 7.05%

$79,731+ $73,501- $226,200

7.85% 7.85%

N.A. $226,201+ 7.85% 8.49% Resets the base year for adjusting the brackets for inflation to 2013.

The House Research summary of HF 0677 notes that the income thresholds for the brackets are reduced to offset the revenue reductions that result from conforming to income tax changes adopted by Congress.

15-16 Individuals; rates. Increases the top income tax rate from 7.85% to 9.4%. Resets the base year for adjusting the brackets for inflation to 2013.

20 Individuals; charitable contributions credit. Creates a credit against the individual income tax equal to 8% of charitable contributions in excess of an amount greater than either 2% of the filer’s adjusted gross income or $800 for married-joint filers or $400 for all other filing types.


23 Individuals; working family credit. Increases the income level at which the working family credit begins to phase out: for tax years 2013 to 2017 by an additional $5,000, indexed to inflation from 2009; and for tax years 2018 and thereafter by $3,000, indexed to inflation from 2008.

According to House Research, this matches changes made at the federal level to the EITC over the last few years.


25 Individuals; military retirement credit. Extends eligibility for the credit for past military service to any veteran who is eligible for military-related retirement pay or pension benefits.


26-27 Individuals and corporations; research & development credit. Makes the credit






Franchise Taxes nonrefundable and reinstates the 15-year carryforward for unused credit.

28-31

Individuals or corporations; historical structure rehabilitation credit. Allows for the challenge as a contested case of any decision made by the State Historic Preservation Office (SHPO) of the Minnesota Historical Society or by the Society itself with regard to applications for the historic structure rehabilitation credit. Requires the SHPO to notify developers in writing of its determinations. Requires credit certificate recipients assigning certificates to another taxpayer to notify Revenue within 30 days of the assignment for it to be valid. Stipulates that passed-through credits are not credit certificate assignments. Changes the application fee for the credit from $5,000 to 0.5% of estimated qualified rehabilitation expenses, up to $35,000.

22-27

Individuals or corporations; historical structure rehabilitation credit. Similar, except that: the application fee change creates a new maximum of $45,000; the credits are issued on a first-come, first-serve basis; the appropriation is limited to $15 million annually; the sunsets are extended by six years; and clarifies the effective date to make the credit effective for rehabilitation expenses first paid after 5/1/10 and for rehabilitation that occurs after 5/1/10.

32 Individuals or corporations; veterans jobs tax credit. Creates a credit for employers hiring certain military veterans equal to 10% of the wages paid to the individual, with a maximum credit of $1,200 for hiring a disabled veteran (i.e. – having a service-connected disability rating); and of $600 for hiring either an unemployed veteran (i.e. – who has received unemployment compensation at any time during the two-year period prior to the hire date). Effective for tax years 2013 through 2016.


35 Franchise tax minimum fee. Increases the corporate minimum fee amounts and thresholds at which those amounts apply by roughly 86%-87%, so that the lowest fee on the schedule rises from $100 to $190 at a threshold which rises from $500,000 to $930,000 and so that the highest fee on the schedule rises from $5,000 to $9,340 at an threshold which rises from $20 million to $37.36 million. Indexes the amounts and thresholds to inflation in the same manner as the individual income tax brackets.

This essentially indexes the minimum fee back to 1990, when it was first adopted.

33 Same.

37 Corporations; REIT dividends. Stipulates that the dividend received deduction does not apply to REIT dividends.

37 Same.

40 Estimated tax; penalty exception. Exempts any underpayment of estimated income taxes through 9/15/13 related to the new fourth income tax tier from penalties and interest.


41 Repealer. Repeals the following: FOCs (previously referenced) Nonresidents’ credit for taxes paid to state of

domicile Long term care insurance credit Definition of FOC for the corporate AMT

42 Repealer. Repeals the following: FOCs Dividend received deduction

No comparable provision. 1, 28 Qualified expansions of greater Minnesota businesses. Creates an incentive program for greater Minnesota businesses that pledge to pay 120% of the federal poverty level for a family of four and expand employment in an amount that depends on the business’s size. Requires the





Franchise Taxes business to meet certain other criteria related to business type to qualify for the incentive program. Creates a refundable credit against the income and corp. franchise taxes equal to 7% of the lesser of: growth in Minnesota payroll or growth in greater Minnesota payroll since enrolling in the program, minus $35,000 (indexed to inflation in future years) times the growth in greater Minnesota full-time employees since enrolling in the program which is awarded on a first-come, first-served basis and is capped in the aggregate at $5 million per year.

No comparable provision. 4 Angel investment credit allocation. Increases the allocation for the credit from $12 million to $17 million for tax years 2013 to 2014.

No comparable provision. 5 Angel investment credit allocation. Directs DEED to develop a plan to increase use of the credit for businesses in greater Minnesota. Increases the credit percentage for investment in greater Minnesota businesses from 30% to 40% after years when certain targets are not met.

No comparable provision. 7 Report to legislature. Requires the current reporting requirements on the angel investment credit also include information on the number of qualified businesses owned by women or minorities.

No comparable provision. 9, 17 Greater Minnesota internship program. Creates a refundable credit against the income and corp.franchise taxes equal to the lesser of 40% of the compensation, up to $2,000, paid to a qualifying intern or the amount the Office of Higher Education certifies. Disallows the credit if the intern replaces an existing employee, engaged in prior work for the employer, or would have been hired without the credit. Limits the total annual credit to $2 million and limits individual employers to a credit for five interns annually. Awards credits on a first come, first served basis.

No comparable provision. 14 Corporations; tax rate. Reduces the corporate tax rate from 9.8% to 9.0%.

No comparable provision. 18 Credit allowed; current military service.Increases the credit for current military service from $120 to $200 per month.

No comparable provision. 19-20 Credit allowed; past military service. Increases the credit for past military service from $750 to $1,500. Expands eligibility for the credit to anyone eligible for federal military-related retirement pay or pension benefits.

No comparable provision. 21 Research and development credit. Increases the second tier of the R&D credit from 2.5% to 3.75%.

No comparable provision. 200% of the federal poverty guidelines for a family of four was $46,100 in 2012. The credit is reduced by half for 2013 because the effective date for the sales tax changes is 7/1/2013.

29, 41 Clothing sales tax credit. Creates a refundable clothing sales tax credit of $60 for married-joint filers and $30 for all other filers, with an additional $30 for the first dependent claimed, $15 for the second and third dependent, $10 for the fourth dependent and $5 for any additional dependents. Reduces the credit by $10 for every $1,000 the filer’s income moves above 200% of the federal





Franchise Taxes poverty guidelines. Reduces the credit by one-half for tax year 2013.

No comparable provision. 31 Corporations; alternative minimum tax rate.Reduces the rate from 5.8% to 5.3%.

Other Technical and conforming provisions. Other Technical and conforming provisions.

House Article 7: Estate and Gift Taxes Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 7: Estate and Gift Taxes Article 6: Estate Taxes 1-2, 9-15

Gift tax; establishment. Imposes a gift tax of 10% on the federal taxable value of gifts (any gift of over $14,000 to those other than your spouse). Creates a cumulative lifetime $100,000 credit against the tax (equal to a $1 million gift exemption). Exempts gifts to charitable institutions and spouses. Requires that taxable gifts made within three years of a decedent’s date of date be included in the Minnesota adjusted taxable estate to determine of the estate meets the $1 million filing threshold. Provides a credit against the estate tax for the gift tax imposed on gifts paid by the estate.

5 Same.

2 Estate tax definitions. According to House Research, the section makes the following three changes. Updates the estate tax for federal changes

enacted through 1/1/2013, and includes the amount of taxable gifts made by the decedent within three years of death in the taxable estate (referenced above).

Provides situs rules for gifts: gifts of tangible personal property would be assigned to the place where property is normally kept or located and gifts of intangible property would be assigned to the domicile of the donor.

Provides special situs rules under the estate tax for nonresidents who have ownership interests in pass-through entities (S corps, partnerships, disregarded single-member LLCs, and trusts) that own real or tangible property in Minnesota.


4 Estate tax; nonresident decedent tax credit. Creates a nonrefundable credit against the estate tax for estate taxes or inheritance taxes paid to another state on property held by a pass-through entity.


5-8 Estate tax; qualified small business property. Makes several changes to the exemptions from the estate tax for qualified small business and farm property. Specifies that “family member” includes trusts whose present beneficiaries are all family members as defined in the Internal Revenue Code. Modifies the provisions related to the requirement that the decedent and/or the decedent’s spouse have been engaged in or materially participating in the trade or business at the time of the decedent’s death to provide additional clarity. Clarifies the definition of “ownership interest”. Directs that property does

1-4 Same.



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 7: Estate and Gift Taxes Article 6: Estate Taxes

not consist of publicly traded securities or assets not used in the operation of the trade or business. Makes clarifying changes to the definition of “qualified farm property” and with regard to the recapture tax.

Other Technical and conforming provisions. No comparable provision.

House Article 8: Sales and Use Tax; Local Sales Taxes Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 8: Sales and Use Tax; Local Sales Taxes Article 7: Sales & Use Taxes; Local Sales Taxes 1 Taxable sales and purchases. Extends the sales

and use taxes to sales and purchases of seat licenses and the rental of box seats, suites, sky boxes, and similar facilities in stadiums and arenas.

2 Taxable sales and purchases. According to the Senate Counsel, Research, and Fiscal Analysis summary of SF 0552 the proposal adds the following services to the definition of “sale and purchase” Receipt of custom computer software Admission to exhibitions and athletic events,

including rental of box seats and suites The granting the right for a consideration to use

“specified digital products” or “other digital products”

Personal services (such as haircuts, spa services, tattoos, piercings)

Repair labor for farm machinery, motor vehicles, and other tangible personal property

Furnishing of court reporter documents except for public defender services

Other personal services such as event planning, moving services, personal shopping, and personal concierge services

Clarifies that services for monitoring and electronic surveillance of persons in in-home detention pursuant to a court order performed at the direction of a county are exempt. Replaces the terms “cable” television services and “direct satellite services” with the term “pay” television services.

2-3 Retail sale; definition. Stipulates that a sale of coin-operated

entertainment and amusement machines is a sale of property for resale (and is therefore exempt from the sales tax).

Provides that the tax on lease-to-own or rent-to-own used vehicles is due incrementally with each lease payment instead of entirely upfront at the time the lease is executed

Provides that the sales of motor vehicle repair paint and materials are a taxable retail sale.

Stipulates that payments made to cooperative electric associations or public utilities as a contribution in aid of construction is not a retail sale but rather a contract for improvement to real property.

3-16 Retail sale; definition. Directs that the sale, lease, or rental of tangible

personal property or the sales of any service listed in 297A.61, subd 3 for any purpose other than resale by the purchaser in the normal course of business are all retail sales.

Provides that the sales of motor vehicle repair paint and materials are a taxable retail sale.

Adds the sale of specified digital products or other digital products to an end user to the definition; and creates definitions for various specified digital products.

Replaces the term “cable television service” with “pay television service” and specifies that the latter includes direct satellite services, subscription programming services, and digital video recorders.

Stipulates that payments made to cooperative electric associations or public utilities as a contribution in aid of construction is not a retail



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 8: Sales and Use Tax; Local Sales Taxes Article 7: Sales & Use Taxes; Local Sales Taxes

sale but rather a contract for improvement to real property.

4 Motor vehicle rental tax; rate increase and exemption for nonprofit car sharing organizations. Increases the tax rate from 6.2% to 9.2%. Exempts nonprofit car sharing organizations from the tax so long as they: provide vehicles subject the tax for their members’ use upon payment of an hourly charge; park vehicles at unstaffed, self-serve locations that are available at any time; and maintain, insurance, and provide fuel for the vehicles.

19 Motor vehicle rental tax; rate increase. Increases the tax rate from 6.2% to 9.2%.

5 Definition; solicitor. Defines ‘solicitor’ as a person who enters into an agreement to directly or indirectly refer potential customers to a business. The language states that a business is presumed to have a solicitor in this state, and therefore has a duty to collect the state sales tax, if it has at least $10,000 annually of sales into Minnesota based on referrals from residents of this state or businesses with a physical presence in the state. Provides a process to rebut the presumption.

The House provision is the so-called “Amazon law”, which is meant to require remote sellers (such as Amazon.com) to collect and remit Minnesota sales and use tax on their sales into the state.

21-24 Drop ship sales; solicitor nexus, severability, and presumption/burden of proof. Adds rebuttable presumptions for “maintaining a place of business in the state” for purposes of establishing sales tax nexus. Defines “retailer” and “solicitor” and allows the presumption a retailers is a solicitor in the state to be rebutted by evidence that the resident did not engage in any solicitation in the state on behalf of the retailer during the 12-month period in question. Includes language that allows provisions to be severed from the bill if found invalid. Allows a person engaged in drop shipping to claim an exemption for resale sales based on an exemption certificate provided by its customer or reseller.

6 Multiple points of use. Provides for a multiple points of use certificate for business purchasers of electronically delivered goods and services that will be used concurrently in more than one location to use.

These certificates allow the buyer to assume responsibility for paying applicable state and local sales taxes directly to the appropriate governments. According to House Research, the language is identical to language originally contained in the Streamlined Sales and Use Tax Agreement and in Minnesota law until 2008. It was removed as a required language from SSUTA and so the state repealed it – but other states have kept the language and not run afoul of the SSUTA.

25 Similar, but contains additional provisions specifying the circumstances under which the seller is relieved of liability.

8 9, 11

Exemptions; additions. Drugs and medical equipment purchased in

Medicare- or Medicaid-covered transactions; single patient use items under the durable medical equipment exemption; all accessories and supplies required for the use of a prosthetic device or durable medical equipment that are not already exempt.

Sales of lodging, prepared food, candy, soft drinks, and alcoholic beverages at noncatered events between an established religious order

26 26-27 28

Exemptions; additions and subtractions. Eliminates the exemption for over-the-counter

drugs. Includes the medical device exemption that is

substantially similar to the one offered in article 8, section 8 of the House bill.

Specifies that the exemption for materials consumed in industrial production applies only when tangible personal property is produced (i.e. – disallows the exemption when nontangible goods are produced or services



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 8: Sales and Use Tax; Local Sales Taxes Article 7: Sales & Use Taxes; Local Sales Taxes 10 12 13 14 15

and an affiliated higher education institution, retroactive to 6/30/12.

Products and services, to the extent not already exempt, related to public safety radio communication systems in all counties.

Sales to nursing homes and boarding care homes, except for construction materials purchased through a lump-sum contract or that will not be used for a facility primarily used by the nursing or boarding care home; lodging; prepared food, candy, soft drinks, and alcoholic beverages; and motor vehicle leases unless the vehicles are used to transport residents or facility property.

Construction materials, supplies, and equipment related to an industrial measurement manufacturing and controls facility where the total capital investment is at least $60 million, 250 new FTEs will be employed, and DEED determines the project will have a significant impact on the state economy. Requires upfront payment of the tax with a refund mechanism.

Construction materials, supplies, and equipment related to improvements of existing structures at resorts or private or public campgrounds, so long as the structure is used by guests. Requires upfront payment of the tax with a refund mechanism.

Construction materials, supplies, and equipment related to a biologics manufacturing facility where the total capital investment is at least $50 million, 190 new FTEs will be employed. Requires DEED to certify that the conditions are met for the exemption to be granted. Requires upfront payment of the tax to be refunded 25% annually over four years. Effective retroactive to 1/1/2013 through 7/1/19.

30 31 32 33 34, 37 35, 38-39 36 40 41 42 43 44

are provided). Eliminates the exemption for materials and

other periodicals, except for newspapers, which are sold via subscription.

Reduces the minimum square footage and investment requirements for a data center to qualify for the current sales tax exemption. Expands the list of allowable expenses that count toward the required investment amount.

Creates the sales tax exemption for the greater Minnesota business expansion program created in Article 6, sec 1 & 28. Exempts construction materials used in the business expansion; to a maximum of $15,000 per business and $1 million in the aggregate per year. Requires the tax be collected upfront and then refunded. Awards refunds on a first come, first served basis and allows a carryforward of unused amounts.

Exempts sales to cities and counties, except for purchases related to an activity generally provided by a private business (i.e. – liquor stores, gold courses, etc.).

Same sales to established religious orders exemption provided for in House Article 8, section 9 and 11.

Extends the exemption for qualifying sales of tangible personal property to qualifying sales of services to veterans groups, fundraising sales by or for nonprofit groups, and fundraising sales sponsored by nonprofit groups.

Extends the exemption for hospital and outpatient surgical centers to critical access dental providers, retroactive to 6/30/07.

Same exemption for nursing home and boarding care homes creates in House Article 8, section 12.

Same exemption for a biopharmaceutical manufacturing facility created in House Article 8, section 15.

Creates an exemption for construction materials associated with a facility that has 400,000 square feet of lab space, that utilizes both high-intensity and low-intensity labs, and has a total construction cost of at least $140 million of a 24-month period. Requires upfront payment and refunding of the tax.

Same exemption for an industrial measurement manufacturing and controls facility created in House Article 8, section 13.

Creates an exemption for construction materials associated with a retail, hotel, amusement, and office construction project located within a two square mile areas with capital investment of at least $250 million. Requires upfront payment and refunding of




the tax. Effective 7/1/14. 20 Transportation sales and wheelage taxes;

authorization. Provides that counties outside the seven-county metro area may impose the 0.5% tax on motor vehicle sales and the wheelage tax (increased from $5 to a minimum of $10 and a maximum of $20 in article 13, section 1) by resolution of the county board instead of via voter approval.


21 Transportation sales and wheelage taxes; allocation. Expands the allowable uses of the transportation sales and wheelage taxes to include operating costs of a transit project or improvement or for transit operations..


22 Local lodging taxes; tax base. Clarifies that the definitions of the bases for the local lodging taxes are the same ones used by Revenue.


23 Local lodging taxes; collections. Prohibits local governments which collect their own lodging taxes from requiring filing and remitting of tax liabilities more than once per calendar year.


24-25 26 27-28 29 30-31

Authority for local taxes. Saint Paul sales tax. Allows the city to

deposit any portion of the 40% of its sales tax revenue dedicated for civic center obligations that is not needed for those purposes into an economic development fund. Extends the sunset of the tax by 12 years, to 12/31/42.

Rochester lodging tax. Increases the total tax rate from 5% to 7% (and the portion dedicated to Mayo Civic Center-related project from 1% to 3%). Adds design costs to the list of approved costs the tax may fund. Increases the maximum bonding for the Civic Center project from $43.5 to $50 million. Modifies the expiration date for the taxing authority from a date certain to any time the city chooses, so long as the proceeds are sufficient to finance the Civic Center project.

St. Cloud-area cities sales tax. Authorizes St. Joseph, St. Cloud, St. Augusta, Sartell, Sauk Rapids, and Waite Park to expend revenues from their current sales and use tax on community and aquatics centers of regional significance and for related facilities. Allows the cities to extend the existing tax by 20 years if approved at by the voters in a referendum at a general election held no later than 11/6/18.

Clearwater sales tax. Modifies the city’s existing local sales tax authority to pay for the costs of specific projects instead of a list described in a city improvement plan adopted by the city council on 12/12/2006.

Marshall lodging and food and beverage taxes. Authorizes the city to use the proceeds from these taxes for construction and ongoing maintenance costs of the Minnesota

Duluth is the only city in Minnesota that has an open-ended sales tax that can be used for general purposes. Broadening the sales tax base here without reducing the rate would create a windfall unique to the city – other cities with sales tax authority will simply reach the allowable amount of collections sooner if they do not reduce the rate in conjunction with the base broadening the Senate bill provides for.

50-51 52-53 54 55

Authority for local taxes. Saint Paul sales tax. Same provisions as in

House Article 8, section 24-25 except that the sunset is only extended by 10 years, to 12/31/40.

St. Cloud-area cities sales tax. Same provisions as in House Article 8, sections 27-28 except that the voter approval must come by 11/6/17.

Clearwater sales tax. Same as House Article 8, section 29.

Duluth sales tax. Directs the city of Duluth to reduce its sales tax rate from 1.0% to 0.87%.



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 8: Sales and Use Tax; Local Sales Taxes Article 7: Sales & Use Taxes; Local Sales Taxes 32 33 34 35

Emergency Response and Training Center and the Southwest Amateur Sports Center.

Marshall, validation of prior act. Re-opens the period during which the city may file its approval of the 2010 special laws authorizing its local lodging and food and beverage taxes with the Secretary of State until July 1, 2013.

Proctor, validation of prior act. Allows the city to approve, by resolution, the extended uses allowed in 2008 and 2010 special laws for its local taxes and to file that approval with the Secretary of State by January 1, 2014.

Bemidji, local taxes authorized. Authorizes the city to impose a 1% food and beverage tax and a 1% lodging tax by resolution. Dedicates the proceeds to fund the costs of operating, maintaining, and capital replacement for the Sanford Center. Authorizes the city to agree to allow Revenue to administer, collect, and enforce the taxes.

Rochester sales tax sharing. Modifies the current requirement that the city share $5 million from its local sales tax with surrounding cities to provide that the city only share such revenues after a city council holds a hearing and votes on a resolution on the matter. Adds Altura, Grand Meadow, Mazeppa, and Wanamingo to the list of cities eligible for such revenues.

36 Repealer Authority for the city of Rochester to impose a

1% food and beverage tax (never imposed) to fund the Mayo Civic Center-related projects.

57 Repealer Exemption for clothing purchases Exemption for Super Bowl admissions Exemption for copies of court reporter

documents Exemption for telecommunications, cable

television, and other direct satellite machinery and equipment purchases

No comparable provision. 1 Contracts with foreign vendors. Requires foreign vendors that sell goods or services to the state to register with Revenue.

No comparable provision. 17-18 Sales tax rates; general and constitutionally required. Reduces the general sales tax rate from 6.5% to 5.675% and the Legacy sales tax rate from 0.375% to 0.325%.

No comparable provision. 20 Lottery tickets; in-lieu tax. Maintains the in-lieu sales tax on lottery tickets at 6.5%.

No comparable provision. 48 Motor vehicle lease sales tax revenue. Maintains the motor vehicles lease tax revenue rate and associated calculations at the current combined 6.875% general plus Legacy rates.

No comparable provision. 49 Local sales tax referenda; authorized expenditures. Allows local governments to spend on the following relating to a local sales tax referenda: disseminating information about the resolution of support the local government is required to adopt; conducting public forums, and providing notice thereof, where proponents and




opponents of the measure are granted equal time to express their opinions; providing objective facts and data on the impact of the proposed sales tax on consumer purchases; and providing objective facts and data related to the programs and projects to be funded with the sales tax.

Other Technical and conforming provisions. Other Technical and conforming provisions.

House Article 9: Economic Development Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 9: Economic Development Article 8: Local Development 1 Bloomington Port Authority; public bidding

requirement. Expands the Bloomington Port Authority’s special law exception to general law regarding public bidding to apply regardless of the source of the funds used and extends it to public improvements beyond structured parking facilities.


2 Appropriation; border cities. Appropriates $1.5 million if FY 2013 for border city enterprise zone and border city development zone tax reductions.


4 5 6

General tax increment (TIF) district changes. General government use. Eliminates the

prohibition on using tax increments for improvements and equipment either primarily serve a decorative or aesthetic purpose or whose costs are twice as high because of the selected of the types of materials or designs compared with more commonly used improvements or equipment.

Four year knock-down rule. Extends the four-year knock-down rule to six years for districts certified between 4/21/2009 and 12/31/2016.

Original net tax capacity adjustment; homestead market value exclusion. Authorizes local governments to reduce the net tax capacity of a TIF district by the amount of the homestead market value exclusion, but not below zero, in cases where the authority administering the TIF district received a market value homestead credit reimbursement for taxes payable 2011 for the district of $10,000 or more; and for taxes payable 2013 the reduction in captured tax capacity resulting from the market value exclusion for the district was at least 1.75% of its captured tax capacity. Requires the administering authority to notify the county auditor of its decision to reduce the net tax capacity of the district.

10 11-12 13

General tax increment (TIF) district changes. Four year knock-down rule. Extends the

four-year knock-down rule to six years for districts certified between 4/21/2009 and 12/31/2016.

Ten year rule. Extends the five year rule to a ten-year rule for all districts certified after 6/30/2003 except for districts in a mining reclamation project area.

Original local tax rate. Clarified that the sum of all the local tax rates excluded that portion of the school rate attributable to the general education levy that would be enacted by this legislature.

7 Fiscal disparities calculations, Mall of America. Exempts C-I tax capacity in the Mall of America TIF districts from the areawide Fiscal Disparities pool. Directs that tax increments in those TIF districts include the tax that would normally be paid to the pool.

1-2. 5 TIF; mining reclamation project area. Authorizes an authority to designate a mining reclamation project area where at least 70% of the acreage contains parcels that meet certain standards related to soils, landfills, quarries, or substandard buildings. Creates special rules for such districts.

8-16 Specific new TIF projects, changes, exceptions 14-17, Similar, except that the Oakdale and Bloomington



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 9: Economic Development Article 8: Local Development

to statutes. Provides for changes and exceptions to current statutes or authority for projects in the cities of Bloomington (the Bloomington Central Station, Met Center, and Mall of America sites), Oakdale, St. Cloud, the Dakota County Community Development Agency, Glencoe, Ely, and Maplewood.

19-25 provisions differ and there is authority for a project in the city of Apple Valley.

17 City of Minneapolis; value capture district for transit. Authorizes the city of Minneapolis to establish a value capture district in specified areas of the city to finance a streetcar line.

18 Similar, except that the authority to establish the district is limited to certain listed parcels.

18 City of Bloomington; Old Cedar Avenue Bridge. Requires the city to transfer increment from its two Mall of America TIF districts equal to the amount of the increment for taxes payable in 2014 as a result of section 7 to be used to renovate or replace the Old Cedar Avenue bridge.


19 Labor peace agreements. Requires labor peace agreements on certain hospitality-related construction projects in Hennepin, Olmsted, Ramsey, or St. Louis counties that have state or local government participation.


No comparable provision. 1, 3-4, 6

TIF; mining reclamation project area. Authorizes an authority to designate a mining reclamation project area where at least 70% of the acreage contains parcels that meet certain standards related to soils, landfills, quarries, or substandard buildings. Creates special rules for such districts.

No comparable provision. 2, 5, 9 TIF; soil deficiency district. Creates sol deficiency districts where at least 70% of the acreage has unusual terrain or soil deficiencies and where the estimate cost of the physical preparation of district exceeds its fair market value. Sets the duration limit at 20 years.

No comparable provision. 7-8 Extension of temporary authority; economic development districts and use of surplus increments. Extends the end of the period for the temporary authority given to local governments in the 2010 jobs bill to use TIF to stimulate construction by two additional years.

House Article 10: Destination Medical Center Sec House Tax Bill (HF 0677) Comments Sec. Senate Tax Bill (SF 0552) Article 10: Destination Medical Center Article 9: Destination Medical Center 1-13 Destination Medical Center. From the House

Research summary of HF 0677: “This article provides local bonding, taxing, and other development financing powers to the city of Rochester to fund public infrastructure for the destination medical center project. The article directs the city to create a nonprofit corporation to help develop the plan and to finance the development. In addition, the article provides state aid, based on the level of new nonpublic capital investment in Mayo Clinic building projects in the city, to provide state assistance in building public infrastructure for the development. The maximum

1-18 Destination Medical Center. From the Senate Counsel, Research and Fiscal Analysis summary of SF 0552: “Provides that state aid may not be paid until certified Mayo expenditures reach $250 million. After that point, the state pledges to pay three percent of the amount of qualified expenditures over $250 million, the total of which may not exceed $455 million plus financing costs. The city must also pledge a contribution of at least $128 million, not including state aid, to finance public infrastructure projects…. Provides that the city qualifies for state transit aid of the count imposes the transit tax under section 12 [of the



Sec House Tax Bill (HF 0677) Comments Sec. Senate Tax Bill (SF 0552) Article 10: Destination Medical Center Article 9: Destination Medical Center

amount of general state aid is $338 million, with no more than $30 million per year (the city and county are expected to pay for $128 million to qualify for this aid). In addition, $119 million funding for public transit for the project is provided with a portion of this to be funded with local taxes.”

article] and the county provides a contribution equal to a .15 percent sales tax imposed for the previous calendar year. State transit aid is .75 percent of qualified expenditures, reduced by the local transit aid contribution. State transit aid payments may not exceed $7.5 million per fiscal year and $116 million in total.” Provides the city and county with a menu of local option taxes to choose from to help finance the project.

House Article 11: Mining Taxes Sec House Tax Bill (HF 0677) Comments Sec. Senate Tax Bill (SF 0552) Article 11: Mining Taxes Article 10: Minerals Tax 1, 3-8 Silica sand mining. Imposes a tax on extracting

fracturing sand of $0.55 per cubic yard of silica and a tax on washing or processing fracturing sand equal to 3% of the sale price of the processed fracturing sand. Creates the administrative and penal regimes for these fracturing sand taxes.


2 Taconite payments and other reductions. Fixes the school share of the portion of the taconite production tax that is used for property tax relief under this section at 95% of the total property tax relief for that year, and directs the other five percentage points to the cities and townships located within that school district.

1 Same.

9-10 Occupation tax; rate increase. Increases the occupation tax rate from 2.45% to 4.9%.


11 Taconite economic development fund. Modifies the current requirement that taconite companies match 50% of the first 14.7 cents out of the Taconite Economic Development Fund (TEDF) to a dollar-for-dollar match to any funds received from the TEDF (the total is 30.1 cents).

3 Similar, except that the effective date is distributions 2013 instead of distributions 2014 as in the House language.

12 Taconite production tax rate; increase. Increases the rate by 5 cents per ton, to $2.56 per ton.

4 Substantially similar.

13 Taconite school aid. Increases the general distribution to taconite area schools by nine cents per ton and provides for a supplemental distribution of taconite production proceeds to school districts with referendum levies, based on the size of each district’s referendum levy authority and its tax base.

5 Substantially similar.

14 Property tax relief. Reduces the distribution to the fund that pays for the taconite homestead credit by nine cents per ton.

Offsets the increased distribution to schools in section 13.

6 Same.

16 Aggregate tax; optional rates. Authorizes counties to impose an additional aggregate mineral production tax of up to 43¢ per cubic yard or up to 30¢ per cubic ton.

Essentially authorizes an additional tax that is equal to up to two times the current tax.


17 2013 onetime distributions. Provides a onetime distribution of $2 million to the city of Hibbing for improvements to the city’s water supply system, $1.7 million to the city of Mountain Iron for the cost of moving utilities required as a result of actions undertaken by United States Steel Corporation, and $1 million to the city of Tower for improvements to




Sec House Tax Bill (HF 0677) Comments Sec. Senate Tax Bill (SF 0552) Article 11: Mining Taxes Article 10: Minerals Tax

a marina in 2013 from moneys that would otherwise be distributed to the property tax relief fund.

18 IRRR school bonds. Authorizes Iron Range Resources and Rehabilitation to issue bonds to make grants to school districts in the taconite tax relief areas for capital projects. These bonds would be paid by production tax distributions equal to ten cents per ton. The bonds would qualify for the credit enhancement program that applies to bonds directly issued by school districts.

8 Same.

No comparable provision. 2 Occupation taxes to be apportioned. Redirects a portion of the occupation tax deposited in the general fund for an annual appropriation to themining environmental and regulatory account in the special revenue fund equal to a five cent tax per ton on the taconite production tax.

No comparable provision. 7 2013 distribution only. Establishes a special fund to receive 30.5 cents per ton of the taconite production tax and allocates specified amount to local projects – effective for the 2013 distribution only.

No comparable provision. 9 Iron Range fiscal disparities study. Requires Revenue to work with the IRRRB to study the Iron Range fiscal disparities program and report to the legislature by 02/01/14.

Other Technical and conforming provisions.

House Article 12: Public Finance (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 12: Public Finance Article 11: Public Finance

House Article 13: Miscellaneous Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552)

Article 13: Miscellaneous Article 4: Special Taxes 1 Wheelage tax; rates. Increases the wheelage tax

from $5 to $10 from 1/1/2014 through 12/31/17 and authorizes counties to impose a tax of up to $20 in whole dollar increments beginning 1/1/18.


1-4, 7-17, 19

E911 fee and Telecommunication Access Minnesota fee. Various provisions related to the extension of these fees to prepaid wireless customers.

1-4, 34-44

Substantially similar. Except that it does not require a report to the legislature.

5 Timely mailing treated as timely filing. Specifies that when the original notice of appeal, proof of service upon the commissioner, and filing fee are delivered by U.S. mail to the Tax Court administrator or district court administrator acting as such, the date of filing is the date of the U.S. postmark stamped on the envelope or other appropriate wrapper in which such materials were mailed. Applies only in cases where the postmark date falls within the prescribed period, and where all materials were mailed first-class postage prepaid to the proper address.


6 Determination of revenue increase. Requires No comparable provision.



Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 13: Miscellaneous Article 4: Special Taxes

MMB to estimate the revenues raised through the sports memorabilia tax (article 5, section 2) and the sales tax on suites and box seats (article 8, secion 1) to determine whether the backup revenues to fund the Vikings stadium are triggered.

18 Political contribution refund; suspension. Extends the suspension of the political contribution refund another four years, until July 1, 2017.


20 Purpose statements. Provides purpose statements for the tax expenditures created in the bill.

Required per Minn. Stat. §3.192


House Article 14: Market Value Definition (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 14: Market Value Definition Article 12: Market Value Definitions

House Article 15: Dept Income, Corporate Franchise, and Estate Taxes (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 15: Department Income, Corporate

Franchise, and Estate Taxes Article 13: Department Policy and Technical:

Income and Franchise Taxes; Estate Taxes

House Article 16: Dept Sales and Use & Special Taxes (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 16: Department Sales and Use and

Special Taxes Article 14: Department Policy and Technical:

Sales and Use Taxes; Special Taxes

House Article 17: Dept Property and Minerals Provisions (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 17: Department Property and Minerals

Provisions Article 15: Department Policy and Technical:

Minerals Taxes; Property Tax

House Article 18: Dept Miscellaneous Provisions (detail not included) Sec House Tax Bill (HF 0677) Comments Sec Senate Tax Bill (SF 0552) Article 18: Department Miscellaneous

Provisions Article 9: Department Policy and Technical:

Miscellaneous

Senate Article 3: Education Aids and Levies Sec House Tax Bill (HF 0677) Comments Sec. Senate Tax Bill (SF 0552) Article 10: Destination Medical Center No comparable provision. 1-14 Education aids and levies. Much of this article is

also carried in the Senate’s K-12 education finance bill. However, this proposal does include a new Education Advancement Revenue stream that essentially “buys-off” the bottom $300 of voter-approved levies for districts across the state through creation of an equalized levy plus aid program. Appropriates $36.5 million in FY 2014 and $57.8 million in FY 2015 for these purposes. Makes other changes to the education funding system which are outside the scope of this edition of the Spotlight.

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