House Taxes Committee Introduces Slim Omnibus Tax Bill

May 11, 2020

The bill includes city-related provisions but excludes all local sales tax requests.

The House Taxes Committee introduced its 2020 omnibus tax bill as a delete-all amendment to HF 3389 (Rep. Paul Marquart, D-Dilworth) and heard public testimony on May 8.

The committee will mark up the bill at a hearing this week and send it to the Ways and Means Committee and then to the House floor.

Most of division report included

The delete-all amendment to HF 3389 includes much of the Property and Local Tax Division report (HF 346) but excludes the local sales tax moratorium initially discussed by the division members, which would have prevented local sales tax requests until the 2022 session. However, similar to the division report, the delete-all amendment does not include any of the 20 local sales tax requests submitted under the new 2019 rules. (Read about the division report in a previous article.)

The delete-all amendment includes a revised version of the division recommendation to create a working group to make recommendations on parameters for future local government sales tax requests.

Specifically, the new working group would be charged with developing a list of capital projects that may qualify as projects of regional significance. It would also develop criteria to be used to assess whether a proposed project qualifies as regionally significant.

The working group must submit recommendations to the ranking members of the House and Senate committees with jurisdiction over local sales taxes by July 31, 2021.

Many measures of interest to cities

Of interest to cities, the bill:

  • Allows counties to choose an interim date to distribute property tax receipts between the June and November distribution dates. Many counties have waived penalties on late property taxes that are due on May 15. Without legislative clarification, counties might not be able to distribute late May tax payments until November.
  • Includes 2019 local government aid (LGA) penalty forgiveness for the cities of Roosevelt and Sargeant.
  • Provides a construction sales tax refund process for the following local government facilities:
    • Fire station and police station in Minnetonka (extends the existing exemption).
    • Fire station and emergency management center in Maplewood.
    • Police station in Crystal.
    • Fire station in Buffalo.
    • Fire station in Grand Rapids.
    • Fire station in Bloomington.
    • Fire station in St. Peter.
  • Allows tax increment financing (TIF) authorities to transfer unobligated increment to the municipality’s general fund. The transferred increment is limited to the excess of increment that is required to make bond payments or other financial obligations within six months of the transfer. Transfers under this authorization could be made through Dec. 31, 2021. This authorization includes a requirement for the municipality to approve a spending plan, amend the TIF plan, and hold a public hearing that discusses the use of transferred increment.
  • Extends the TIF five-year rule to 10 years for all redevelopment districts located outside the seven-county metro area. This change only applies to districts certified after June 30, 2020.
  • Extends the TIF six-year rule, which requires increment to be spent on efforts to decertify the district, to 11 years for redevelopment districts whose five-year pooling rules are extended to 10 years.
  • Clarifies that local lodging taxes collected directly by local governments apply to the entire price of lodging, including services provided by accommodation intermediaries (online lodging providers). This clarification conforms to the definitions used for the state sales tax and for local lodging taxes currently collected by the state.
  • Gives local governments the temporary authority to redirect a portion of certain unencumbered local tax revenues for general fund purposes through Dec. 31, 2021. The local government may only redirect the money received in a calendar quarter not needed to fund debt obligations in the next calendar quarter and must also have a plan for the use of the revenues and hold a public hearing on the topic prior to the diversion of any funds. This applies to the following local taxes:
    • General local taxes, including county transit sales taxes.
    • Food and beverage taxes.
    • Liquor taxes.
    • Admissions and amusement taxes.
    • Lodging taxes imposed by special law, except for the portions dedicated to funding a local tourism or convention bureau.
  • Expands the workforce and affordable homeownership development program by adding loans in addition to grants funded through an annual transfer of mortgage registry and deed tax into a newly created account within the housing development fund.