Senate Omnibus Tax Bill Released and Moves Through Committee

May 1, 2023

The bill would include a $40 million increase to local government aid.

For more background information about the House version of the omnibus tax bill, read a previous article.

On April 27, the Senate Taxes Committee voted 8-2 to send the Senate omnibus tax bill to the Senate floor.

The bill, SF 1811 (Sen. Ann Rest, DFL-New Hope) includes a $40 million annual increase to local government aid (LGA) and a $210 million one-time public safety aid allocation to cities.

View the Senate tax bill spreadsheet (pdf)

The House approved its bill, HF 1938 (Rep. Aisha Gomez, DFL-Minneapolis), by a vote of 69-57 on April 27.

What’s included in the bill

The Senate Taxes Committee met on April 26 and 27 to hear an overview of the bill, take public testimony, and have committee discussion. The overall net combined cost of tax cuts and spending in the bill totals $2.7 billion in fiscal years 2024-25 and $900 million in fiscal years 2026-27.

The bill includes numerous local sales tax authorizations, tax increment financing provisions, as well as increases to several aid programs. Some of the most notable provisions for cities would:

  • Increase LGA by $40 million annually.
  • Provide $210 million for one-time public safety aid to cities. Proposed eligible uses could include, but are not limited to:
    • Training programs for peace officers and other public safety staff on mental health crisis response, de-escalation strategies, or community engagement.
    • Personnel and equipment costs.
  • Update formula factors for the LGA program.
  • Reinstate the Historic Structure Rehabilitation Credit.
  • Increase the targeting property tax refund to homeowners with increases larger than 10%, with a maximum refund of $2,000.
  • Increase the homestead market value exclusion, which has remained flat since 2011.
  • Create an electric generation transition aid program for cities that experience the decommissioning of an electric generating power plant.
  • Establish a property tax classification rate reduction for 4d low income housing property, causing a shift onto other properties.
  • Create a property tax exemption for energy storage systems with a storage capacity under 300 megawatt-hours that are outside an energy community, causing a shift onto other properties.
  • Establish several specific construction sales tax exemptions for particular units of local government.

It also includes numerous local sales tax provisions and numerous city specific tax increment financing provisions.

The bill does not include the general construction sales tax exemption that is included on a temporary basis in the House omnibus bill and Gov. Tim Walz’s proposal. Nor does it include increases to the Homestead Credit Refund or Renter’s Credit.

View details of the $40 million LGA increase (pdf)

Testimony on the bill

Written and in-person testimony was limited to only remarks made in opposition. Most of the opposition was regarding the one revenue generator in the bill, referred to as worldwide combined reporting for corporate taxation.

Other concerns brought up during testimony included a smaller increase in local government aid and county program aid than what is included in the House omnibus bill.

In addition to written testimony from the League, Metro Cities, Minnesota Association of Small Cities, and the Coalition of Greater Minnesota Cities also submitted letters outlining concerns with the proposed smaller increase to local government aid.

View the League’s written testimony on the Senate omnibus tax bill (pdf)

Committee discussion and amendments

Much of the discussion in the Senate Taxes Committee centered around the worldwide combined reporting language. The committee did not approve a proposed amendment that would remove that language from the bill. It did slightly alter the LGA changes by allowing a modification for the City of Hibbing. An amendment to the Rochester local sales tax language was also adopted.

View details of the $210 million in one-time city public safety aid (pdf)

What’s next

The Senate floor will hold a vote on the bill May 2. The League will continue working with both tax committee chairs and the tax conference committee when it is formed to ensure that city priorities are included in a final omnibus tax bill.

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