Senate Releases Full Tax Bill

May 9, 2022

The Senate tax bill contains several provisions of interest to cities, but does not include the local government aid formula update proposed by city organizations.

Both the House and Senate made progress last week on omnibus tax bills, but the bills contain many differences. With only two weeks left in the session, a conference committee for the bill has yet to be named.

House bill

The House completed the work on its omnibus tax bill on May 4 with the passage of HF 3669 on the House floor on a 69 to 62 vote. During the floor debate, only two amendments were offered and only one amendment was adopted.

For more information on the contents of the bill — which includes measures on local government aid (LGA), construction sales tax exemption, affordable housing aid, local sales taxes, and tax increment financing — see a previous article.

Senate bill

Although the Senate passed a narrow tax bill on April 7, the work on the full tax bill was far from complete. On May 8, the Senate released the initial draft of its full omnibus tax bill as a delete-all amendment to the House omnibus tax bill, HF 3669 (see the latest engrossment of HF 3669).

The draft does not include the LGA update proposed by the League, the Coalition of Greater Minnesota Cities, the Minnesota Association of Small Cities, and Metro Cities, which is included in the House bill. The draft also does not include the construction sales tax exemption for local units of government, which has been a priority for cities since the passage of the general city sales tax exemption in 2013.

The House bill includes a temporary construction sales tax exemption retroactive from July 1, 2021, through Dec. 31, 2022.

The Senate Property Tax Subcommittee recommendations — which were completed on May 3 with the passage of the subcommittee report, SF 3706 as amended by the chair’s delete-all amendment — are largely included in the Senate delete-all omnibus tax amendment.

For a recap of the provisions in the Senate subcommittee report, see a previous article.

Senate provisions of interest to cities

The Senate delete-all amendment includes versions of general local sales tax requests for the cities of Rochester, Marshall, Waite Park, Aitkin, Blackduck, Bloomington, Brooklyn Center, East Grand Forks, Golden Valley, Henderson, Park Rapids, Proctor, and Roseville, as well as Cook County, Rice County, and Winona County.

The amendment also includes a provision to assist the cities granted local sales tax authority in 2021, as well as those being authorized this year that have experienced significant construction cost increases since they proposed their projects. Under the amendment, a city that has not yet conducted its referendum could increase its total project cost by up to 10% if it follows certain requirements, which include adopting an additional resolution reflecting the increased amount.

The Senate delete-all amendment also includes several articles reflecting technical and policy recommendations of the Department of Revenue for sales and use taxes, police and fire state aids, and miscellaneous taxes.

Lastly, city concern remains on a provision included in the bill that would reduce the 4d Low-Income Rental Classification rate to the lowest property tax class in the state.

Next steps

The Senate Taxes Committee will meet on May 9 and May 10 to consider its delete-all amendment to the House version of the omnibus tax bill. The committee will replace the House language with the Senate tax provisions, including the income tax and federal conformity changes in SF 3692.

The full Senate is expected to consider the Senate amendment to the House bill later this week, and then a conference committee will be formed.

Read more news articles