Second Omnibus Tax Bill Sent to Governor

The bill, which still includes several provisions of interest to cities while adding school funding demanded by Gov. Dayton, is also expected to be vetoed.
(Published May 22, 2018)

(Updated May 23, 2018)

UPDATE: Gov. Dayton vetoed the second omnibus tax bill on May 23.

—Read the governor's veto letter (pdf)

After a last-minute scramble to address Gov. Dayton's concerns with the first omnibus tax bill, which was vetoed, the House and Senate both passed HF 947 on May 20, the last day of session. The bill was originally an education finance bill. It was amended to include most of the first omnibus tax bill, including several provisions of interest to cities.

HF 947 (Chapter 205) was also amended with additional funding for schools, although a lower amount than the governor demanded in his veto letter.

Similar to the original vetoed omnibus tax bill, the amended second tax bill focuses on personal income and corporate income tax changes needed to conform with the federal Tax Cuts and Jobs Act of 2017. The bill also offsets personal and corporate income tax increases that would otherwise occur under the conformity changes.

Based on the bill’s similarities to the first vetoed bill, Gov. Dayton indicated late on the evening of May 20 that he would likely veto this bill as well. The governor has 14 days to decide if he will sign the bill.

Below is a list of items of interest to cities.

Expanded local tax prohibition

The agreement includes the modifications to the existing statutory prohibition on local income and sales taxes to specify that the prohibition also covers excise taxes and fees of food and containers. The League opposed the provision but successfully argued for an exemption from the fee limit for license fees.

Local government aid

  • Lilydale. The agreement includes a one-time increase in the LGA distribution for the City of Lilydale ($150,000 for regional sewer costs), but does not increase the LGA appropriation to cover the cost.
  • Hermantown. The agreement includes a one-time increase in the LGA distribution for the City of Hermantown ($97,260 to retroactively address an unintentional LGA formula error), but does not increase the LGA appropriation to cover the cost.

Sales tax exemptions

The bill includes:

  • Construction materials sales tax exemption for a public safety facility in Minnetonka.
  • Construction materials sales tax exemption for a fire station in Inver Grove Heights.
  • Sales tax exemption for the construction or remodel of a fire station in Virginia.
  • A retroactive sales tax refund on the construction costs related to an Elko-New Market water treatment facility.
  • An extension of a sales tax exemption for reconstruction projects in the City of Melrose as a result of a downtown fire.

Tax increment financing (TIF) special law provisions

The bill includes:

  • Bloomington Central Station TIF district.
  • Champlin Mississippi Crossings TIF district.

Local sales taxes/tax adjustments

The bill includes:

  • St. Cloud food/beverage tax and lodging taxes modification.
  • Cloquet general sales tax use adjustment.
  • St. Paul lodging tax increase.
  • Minneapolis lodging tax modification.
  • Excelsior local option sales tax authorization.

Other items of interest to cities include:

  • A clarification that cities and towns may appropriate funds for historical societies in the respective city or town. Under current law, a city or town can only appropriate funds for a county historical society.
  • An adjustment to the Cloquet Area Fire and Ambulance District authority.
  • A grant to the city of Mazeppa and a sales tax exemption for building materials related to recovery reconstruction due to a fire in the city.
  • A state general property tax abatement and sales tax break for medical facilities in underserved areas of Greater Minnesota.
  • A state general property tax abatement for qualifying natural gas line extensions in unserved areas.

Read the current issue of the Cities Bulletin

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