A weekly message from your Senator
Dear Constituents and Friends,
Today marks the end of the first phase of the legislative session with the second deadline. We start our Easter/Passover/Spring break this week and will come back on April 9th to finish the 6 remaining weeks of session. We have tackled the state contracts and pension bills on the floor and discussed the constitutional amendment regarding dedicated revenue to transportation in committee. I was happy to co-author a bill (S.F. 3503) to provide a sales tax construction exemption for to the City of Minnetonka for a new police and fire public safety facility serving the district. This week I also had hearings on two bills, my Uniform Athlete Agents bill (S.F. 2399) in the Commerce Committee and a technical change to Sophia’s Law to ensure the intent of the law is clear before this boating season (S.F. 3380) in the Environment and Natural Resources Policy and Legacy Finance Committee. Lastly, I was part of a press conference on gun safety reform and I am hopeful that with your help we find the courage to have a bi-partisan debate on this most important issue affecting us all.
When we come back from break we expect a tax conformity bill to be discussed in the tax committee, a second influx of funding to deal with the MNLARS system, and much more! As always, I welcome your comments, input and perspective on issues you care about.
Happy Spring Break!
Melisa
SF 3503 (ANDERSON, P.; Cwodzinski; Franzen): Minnetonka police and fire public safety facilities sales tax construction exemption authorization
Provides an upfront sales tax exemption for fire station construction
Senate status: First hearing
House status: HF 3793 (LOON, Pryor, Rosenthal, Applebaum) – heard in Taxes; laid over
Revenue est.: ($110,000) 2018-2019 | ($700,000) 2020-2021
SUMMARY: The bill provides an upfront sales tax exemption for construction of a new fire station and the remodeling of an existing fire station that will accommodate the city’s police station. The exemption would apply both to purchases made directly by the city, as well as contractors and subcontractors. Effective for sales and purchases made before Jan. 1, 2021.
BACKGROUND: Under current law, cities are considered exempt from sales taxes and able to purchase construction materials tax-free if the purchases are made directly by the exempt entity or a contractor is designated as the purchase agent and the materials are bid separately. Local governments say the latter is a complicated process that often isn’t utilized. This bill would allow purchases made by contractors hired for the fire department project to receive an upfront sales tax exemption on purchases. The Revenue estimate notes the project is estimated to cost about $25 million, with total construction materials costs at $12.5 million.
Expanding the exemption to contractors and subcontractors without the parameters in current law has been discussed multiple times in recent years (including last year in this committee), but the legislature has not authorized it. The Department of Revenue cites complications with an ability to audit purchases and their ultimate use to ensure the exemptions are not being abused. Aside from being complicated, the League of Minnesota Cities also contends the current-law bidding process is a liability because it requires cities (and other entities) to take responsibility for material defects. For these reasons, many exempt entities choose to forgo the benefit rather than commit time and resources to obtaining the exemption.
What about those pre-paid property taxes?
After the federal government passed its tax reform package at the end of 2017, thousands of Minnesotans lined up before Dec. 31 to pre-pay their 2018 property taxes. That is because of a change in federal law that now caps the total amount of state and local taxes that may be deducted on federal tax returns at $10,000.
Those making prepayments were hoping to deduct the full amount of their 2018 state and local taxes on 2017 federal tax returns – and many are doing so as they file their 2017 taxes before this year’s April 17 deadline. However, guidance from the IRS as to whether this will be accepted is still unclear.
This week, the Minnesota Department of Revenue issued a request for clarification from the IRS. Minnesota’s tax officials have said they will follow federal treatment of these prepayments, meaning if they are considered an acceptable deduction at the federal level, Minnesota will follow suit. The Revenue Commissioner’s letter to the federal government may be found here.
Asking the voters to decide: how should the state fund transportation?
Minnesota voters may have the option to vote this fall on whether to devote millions of general fund dollars to transportation funding. The Senate Transportation Committee heard a bill this week that would divert sales tax revenue from car rentals, auto repairs, and auto parts from the general fund to newly created and existing transportation accounts.
The bill phases in the diversion of general fund dollars so that by 2022, $133.4 million dollars would be dedicated to transportation each year. In order to simply maintain our current system, it’s estimated the state needs $900 million annually.
Proponents say the state is long overdue for increased transportation spending, and the bill will create construction jobs. Although the increased funding will still be inadequate, any infusion of cash will be put to good use to repair our state’s aging road and bridge infrastructure.
Opponents say general fund dollars, which are primarily spent on education, health care and local government aid, should not be shifted because it tradeoffs with these priorities. Because these funds would be constitutionally dedicated, the shift would be permanent—if times got tough economically for our schools, seniors, or local governments, these general fund dollars could not be shifted back.
The bill passed the Transportation Committee on an 8-7 vote and will next be heard in the Rules Committee. (SF 3837)
State employee contracts
There is some great news for our hard-working state employees. After months of waiting, the Legislature finally passed a bill ratifying state worker contracts, which will give more than 35,000 state employees their long-awaited moderate and fair pay raise. These state contracts have undergone an extensive negotiating process, are fair to employees and are a good deal for Minnesota taxpayers. The raises have gone into effect because they were ratified by both the Senate and House this week. (SF 3154)
Helping homeless youth
As the needs of youth seeking services changes over time, organizations have faced challenges that make meeting their needs more difficult. Legislation that helps organizations providing support services and transitional housing to homeless and vulnerable youth was passed out of the Human Services Reform Committee. The current landscape for these services is somewhat fragmented and can create delays for those accessing critical services. This legislation seeks to improve access and close the gaps.
The bill would provide more flexibility for grants provided by the Department of Human Services to serve younger populations and directs the agency to take a closer look at how organizations obtain certain certifications for working with youth and whether a change is necessary. (SF 2988)