A weekly message from your Senator
We have reached our first deadline this week! Bills need to have gone through the committee process in one body, House or Senate, in order to become viable to meet the 2nd deadline next week in the remaining body. This week I had a hearing on my bipartisan tax bill to provide disaster relief to those impacted by the disasters of Hurricane Harvey, Irma and Maria. More details are found below.
Finally, the Senate passed a bill to attempt to resolve the MNLARS issue. As a member of the Transportation Committee, I was not supportive of this measure because I believe it falls short in either providing the tools necessary to adequately manage the progress or finding a long term solution to the ongoing system failures. I welcome your thoughts on this particularly troublesome launch.
I continue to work with my colleagues on the tax conformity issue and enjoy meeting with constituents to learn more about the issues you care about.
Sincerely,
Melisa
SF 2523 (FRANZEN, Rest, Bakk, Dziedzic, Gazelka): Disaster Tax Relief and Airport and Airway Extension Act conformity
Conforms to federal tax changes related to 2017 hurricane disaster-relief
Senate status: First hearing
House status: HF 3233 (MARQUART, Mariani) – no hearings
Revenue est.: ($5.54 million) 2018 | $1.99 million 2019 | $1.02 million 2020-2021
SUMMARY: On Sept. 29, 2017, the federal Disaster Tax Relief and Airport and Airway Extension Act was signed into law. It provided relief for taxpayers affected by Hurricanes Harvey, Irma and Maria in 2017. As a reminder, these storms occurred on Aug. 23, Sept. 4, and Sept. 16, 2017.
SF 2523 conforms Minnesota’s tax code to the federal changes specifically related to these three hurricanes. This bill does not reflect other major federal tax changes passed later in 2017. The three provisions that would be changed:
- Typically, early withdrawals from retirement accounts are subject to a 10% tax penalty. Under this bill, Minnesotans who incurred damages from the hurricanes are allowed up to a $100,000 early withdrawal without incurring the 10% penalty. To take advantage of this, the withdrawn amount must either be repaid or included in gross income over a three-year period, instead of the year in which it was withdrawn.
- In 2017, casualty losses were only tax-deductible for taxpayers who itemize if they exceeded 10% of Adjusted Gross Income. This bill allows any Minnesotan who suffered a hurricane-related loss – regardless of whether they itemize – to deduct the entire amount of losses, without regard to the 10% threshold.
- The current limits on charitable contributions are suspended for qualified, hurricane-related donations made before December 31st, 2017.
Dayton tax plan would mean tax cuts for most Minnesotans
Much of Governor Dayton’s supplemental budget proposal is focused on how Minnesota should respond to the federal tax overhaul passed late in 2017. All 50 states are wrestling with how to align their tax codes closer to the federal government’s new standards, but how each state approaches that will differ depending on their current baseline for state tax computations.
In Minnesota, state taxes are based off Federal Taxable Income (FTI). That is the number after federal personal and dependent exemptions and credits are applied. Since Congress eliminated those exemptions, Minnesotans’ FTI now will be much higher, meaning that just conforming to federal tax changes would cause large tax increases for most taxpayers.
Governor Dayton’s proposal makes one big change to the state’s tax collection method by moving the base from FTI to Adjusted Gross Income. It sounds fairly technical, but that move allows Minnesota to retain all current state tax deductions and credits that already exist in law. The new system would permit Minnesotans to choose the new, higher federal standard deduction ($24,000 for married-joint filers) but still itemize at the state level, if that was more financially beneficial.
The Governor’s plan includes $319 million of tax relief. Much of that is in the form of a new state-based personal and dependent credit worth up to $60 per person on a tax return, including dependents. About 1.9 million Minnesotans would see an average $117 tax cut as a result of this change. The Working Family Credit for low- to mid-income Minnesotans also would be increased and income eligibility would be expanded, sending an average $160 tax cut to the 329,000 eligible filers. In addition, the Governor recommends fully conforming to federal Section 179 expensing guidelines, which allow businesses and farmers to deduct the full cost of qualifying purchases. This provides more than $100 million in up-front tax cuts to farmers and business owners.
The Governor’s tax plan ensures no Minnesota wage-earner would see a tax increase next year as a result of federal action. However, he does recommend rolling back some of the unsustainable, expensive tax breaks passed last year that largely benefit corporations, tobacco companies, and the 1%. He recommends freezing the estate tax threshold at $2.4 million instead of allowing it to increase to $3 million, since it is an expensive change benefitting less than 1,000 of the richest people in the state. The Governor also asks to repeal last year’s tax cuts on tobacco products and premium cigars, as well as the freeze of the state general levy. The business property tax exemption for the first $100,000 of property value would remain intact.
The Governor’s budget recommendations are a starting point for lawmakers to begin discussing the best route forward. Senators from both parties already have introduced their own conformity ideas, although none have received hearings in the Senate at this point. Committees will spend most of April discussing the path forward, with hopes to resolve the issue before session ends so taxpayers and tax preparers have ample time to prepare for the 2019 filing season.
MNLARS funding bill sent to the Governor
This week, the Legislature passed a bill to provide funding for continued improvements and development for the Minnesota License and Registration System (MNLARS). Since its rollout in July, the vehicle services components of MNLARS have been riddled with problems and system failures, complicating tab renewals and vehicle title transactions and seriously inconveniencing Minnesotans.
The bill provides $10 million dollars from an existing account in Driver and Vehicle Services, including $350,000 over the next two years for an information technology auditor to examine the progress being made on MNLARS, budgeting on the project and interaction with stakeholders like the deputy registrars. The bill conditions the funding to be released on a quarterly basis by a steering committee of six legislators, who will receive quarterly progress reports from the Department of Public Safety (DPS) and the Office of Information Technology (MN.IT). If a majority of the six legislators vote to slow, reduce, or condition the release of the quarterly allotment based on the progress report, the commissioners have 20 days to work to resolve the concerns of the legislators so that they may receive the quarterly funds. If the legislators are still not satisfied, the quarterly allotment is not released, and DPS and MN.IT would need to submit proposed legislation to fund MNLARS during the next legislative session. (SF 3133)
Public employee contracts moving toward passage
Every two years, the Legislature must approve employment contracts between the state and public employee unions. The current contracts provide a modest 2% cost-of-living increase for most public employees this year and a 2.25% increase next year. The contracts have undergone an extensive negotiating process, are fair to employees, and are a good deal for Minnesota taxpayers.
The agreements cover employees that work as public health nurses, college professors, and MnDOT engineers across the state, and will help recruit and retain qualified employees to carry out the services Minnesotans expect from state government. The contracts have successfully moved through the committee process and are awaiting passage on the Senate Floor. (SF 3154)
Elder care bill advances
Advocates are working hard to respond to legislation moving through the committee process to address elder abuse. This legislation includes some of the provisions included in bipartisan legislation containing the recommendations from the independent work group on elder abuse convened by AARP; however, it lacks several of the elements from the bill that create the real and systemic changes needed and that allow seniors to actually enforce their rights in a meaningful way.
Missing from the proposal are important protections around licensure, deceptive marketing, and discharge and termination of services in assisted living facilities, including the right to appeal those determinations. Also absent is the ability to bring a private right of action for violations of the Health Care Bill of Rights and the Home Care Bill of Rights, the part of the legislation that gives seniors and their families the authority to seek damages in court.
Assisted living facilities are not licensed in Minnesota. This bill would convene a task force to discuss the possibility of licensure and provide recommendations to the Legislature for next year. But seniors can’t wait for another year of discussion. As Minnesota is the only state that does not require licensure, it shouldn’t be a matter of if licensure is needed, it should be a matter of how it happens and how quickly it can be implemented.
All of these consumer protections already exist within the bipartisan work group bill, but this bill has not been scheduled for a hearing. The full recommendations of the independent work group deserve to be heard. The bill backed makes some important progress, but now is not the time to settle when the health and safety of our seniors requires bold, systemic changes. (SF 3437)