May 5, 2017
Minnesota Legislature – Weekly Recap
House and Senate majorities did as Governor Mark Dayton requested earlier this week in agreeing to compromise language on all of their budget bills. The Governor had stated last week that he would not begin negotiations with the legislature until they could come to the table with one bill, unlike in the past where there were three sides negotiating. House and Senate committee chairs and leadership met all weekend working their way to the bills that were amended in conference committees on Monday and Tuesday this week.
Governor Dayton, House Speaker Kurt Daudt (R-Crown), and Senate Majority Leader Paul Gazelka (R-Nisswa) met on Wednesday to discuss how they wanted to proceed with negotiations and they determined they would begin with Higher Education and Agriculture Finance, as those may be simpler to find agreement. The discussions on those two bills began on Thursday afternoon. The Governor and DFL leaders have expressed their displeasure with the amount of policy items within the budget bills and they would like to limit the number of those provisions in the final bills.
Due to the House and Senate setting committee deadlines much earlier than in the past, they have ample time to finish their work if an agreement can be reached. Session must adjourn by May 22.
Click here for a Session Daily article on Wednesday’s meeting.
House Capital Investment Committee Approves $600 Million Bonding Bill
On Wednesday evening, the House Capital Investment Committee presented, amended, debated and then passed a $600 million bonding bill. With no bonding bill last session, many were hoping for a larger bonding bill this year. Traditionally, the first year of the biennium is focused on the budget with a possible small bonding bill and the second year is focused on a larger bonding bill. The $600 million bonding bill the House unveiled is larger than in previous budget years, but due to the absence of a bill last year, additional funds were granted. However, this is only the House’s version. Governor Mark Dayton unveiled a significantly larger $1.5 billion proposal in January.
By law, capital investment bills need a supermajority approval, 81 votes in the House, to be enacted. Republicans hold a 77-57 majority, meaning they would need to secure four votes from the minority to pass a bill.
Of the $600 million proposed House bonding bill, 81% of the bill is for infrastructure, including $240.2 million for transportation work, $139.8 million for water-related projects and $106 million for facilities preservation.
Funding in the proposal includes:
- $59.25 million for the local road improvement program;
- $59 million for local bridge replacement;
- $57.02 million for rail grade separation crossings in Moorhead and Red Wing on crude oil rail corridors;
- $40 million in wastewater infrastructure;
- $32.48 million for the Minnesota State system, including $25 million in asset preservation;
- $30 million in asset preservation at the University of Minnesota;
- $15 million for Department of Natural Resources asset preservation;
- $11.5 million for four flood hazard mitigations; and
- $10 million for public housing rehabilitation.
It is unknown how a bonding bill this year could impact one next year. The House and Senate both need to pass bills of their respective floors and find a compromise in the next few weeks.
House/Senate Tax Proposal
On Monday evening, the Tax Conference Committee approved the compromise language to get the bill in shape to begin negotiations with the Governor and his staff. The differences between the House/Senate proposal and the Governor’s is staggering and it could take a significant amount of time to come to an agreement. The House/Senate proposal is looking for $1.15 billion in tax relief, whereas the Governor’s proposal was only $200 million in tax relief. Reminder, there has been no tax bill signed into law the past two years.
The MBA-supported provision to address the Department of Revenue's Residency Factors is included in the House/Senate proposal. These factors currently include the location of a person's bank accounts and also where their financial advisor, attorney and others are located. The language that is included in the bill would remove these factors from the list and not allow the Department to consider them at any time. The MBA has been actively involved in the drafting of language and lobbying for this measure the past three years.
A provision the MBA is supporting to help first-time homebuyers was also included. It would allow for a deduction of up to $15,000 for married joint filers who save for their down payment in a special account. Under this program, individuals could establish dedicated savings accounts to help buy a home for themselves or another qualified beneficiary; contributions to and interest earned on the accounts would be exempt from Minnesota income tax if used for a down payment or closing costs on a home for the beneficiary. A first-time homebuyer is someone who does not own or has not owned a residence in the last three years. The program would become effective the day following enactment and, for income tax purposes, would apply beginning for tax year 2017. (The appropriation for the administering of the program is included in the House/Senate State Government Finance proposal.)
The bill also increases the exclusion under the estate tax to the federal exclusion amount; repeals the subtractions for qualified farm and small business property, beginning for decedents dying in 2016; and provides that recapture tax is not triggered by transfers of qualified property to governmental units with eminent domain powers.
The bill also includes Section 179 expensing to allow Minnesota individual filers (S-corporations, partnerships, and LLCs filing as partnerships)and corporate filers to use the federal Section 179 expensing schedule, beginning with purchases in tax year 2018. Under current law, businesses must add back 80% of the additional amount claimed to Minnesota taxable income on its Minnesota return, and then may subtract one-fifth of the amount added back in each of the next five tax years.For tax years before 2018, the current Minnesota approach would apply and expensing would follow the five year add-back schedule until completed. Effective beginning in tax year 2018.
Also included in the bill is:
- a first in the nation student loan tax credit;
- tax deductions and credits for families contributing to 529 savings plans;
- modification to the state’s research and development tax tier rate;
- a refundable credit for expenses parents incur with delivery of a stillborn baby;
- a sales tax exemption on materials used to build a proposed $150 million soccer stadium in St. Paul, as well as a permanent property tax exemption for the site;
- expansion of the child and dependent care credit; and
- changes to the state general levy (applies to commercial industrial (C/I) and seasonal properties) excluding the first $150,000 in market value for C/I properties and eliminating the inflator for both C/I and cabin properties beginning in pay 2018.
Click here for a Session Daily article on the bill.
House/Senate Jobs Proposal
On Monday afternoon, the Jobs Conference Committee met to approve the House/Senate compromise proposal. The $379.5 million bill includes budget and policy items for several agencies, including the Department of Employment and Economic Development, Commerce Department, Department of Labor and Industry and the Iron Range Resources and Rehabilitation Board. This proposed budget is $105 million lower than the current base. The bill also has many controversial policy provisions regarding energy, including a provision the Governor has already vetoed this year.
As we previously mentioned, the MBA-supported language on Residential PACE is included in the bill. The language would create a stakeholder group, which would be convened by the Department of Commerce, to develop recommendations and draft legislation regarding consumer protections for energy efficiency financing programs for residential homes. The language would also suspend the statutory authorization for Residential PACE loans until these consumer protections are implemented. (Federal legislation has been introduced that would require disclosure for such loans through the Truth in Lending ACT (TILA), a federal law created to inform use of consumer credit by requiring disclosures about its terms and costs.)
Other items of interest included in the bill:
- $125,000 increase in the financial institutions base in 2019 and in each year of the 2020-2021 fiscal years.
- $400,000 each year for grants to Prepare and Prosper for purposes of developing, marketing, evaluating and distributing a financial services inclusion program that will assist low-income and financially underserved populations to build savings, strengthen credit and provide services to assist them in being more financially stable and secure. The MBA has been a part of this project for the past three years.
- $200,000 is appropriated to create and execute a statewide education and outreach campaign to protect seniors, meaning those aged 60 or more years, vulnerable adults and their caregivers from financial fraud and exploitation.
- Creating the “Getting to Work” grant program to make grants to nonprofit organizations to provide, repair, or maintain motor vehicles that will assist low-income individuals in obtaining or keeping employment. Outlines program and application criteria. Requires a report to the legislature on program outcomes.
House/Senate Public Safety Proposal
On Tuesday morning, the Judiciary/Public Safety Conference Committee met to adopt their House/Senate compromise proposal to send to the Governor. The Senate version only included appropriation language, whereas the House included numerous policy provisions. In the compromise, the Senate did accept many of the policy provisions. One provision that they included was language (H.F. 2067) that would change the current law regarding charities and how funds given to those charities are treated in claw back situations by exempting donations or contributions of a promissory note, stock, bond, debenture, or other nonmonetary asset. The version passed in 2012 was written for cash gifts and specifically excluded investments.
The MBA worked on this issue back in 2012 when charities were looking for legislation that would stop claw backs of funds they had received, by stating that the funds are often spent and that they could go under if they had to repay. This change goes much further than just cash contributions, which was the discussion back in 2012. The change this session is written for the remaining three foundations that are in litigation on the Petters case and it is likely that with this change the cases against them would be dismissed. At the hearing, there was a lengthy discussion from the parties involved in the current case before the Federal Bankruptcy court, giving their interpretations of what the bill would accomplish. The MBA feels that the language in 2012 was truly compromise language that could give charities the clarity they needed and this language is not needed this year. Unfortunately, some in the legislature do not agree with this and are looking to pass this provision. The Governor’s office has been made aware of the issue.
Language that would expand the crime of unauthorized computer access by criminalizing interference with point-of-sale terminals to collect information from credit, debit, or similar cards was removed from the final compromise language. The language had been included in the House version, but the bill was never heard in the Senate.
- Legislation (H.F. 347) that would make changes to the process by which a manufactured home is determined to be an improvement to real property was included in the House/Senate proposal this week. This language also creates a system for resolving situations where the ownership of a manufactured home is at issue. The MBA was approached a year ago regarding this topic and has been involved in the discussions throughout the process. Here is a summary of the bill.
Please contact Tess Rice or Therese Kuvaas for any additional information.
For more legislative updates, follow Therese Kuvaas, Government Relations Manager, on Twitter @thkuvaas