May 19 is the final day of the legislative session. All major finance bills have now passed in both bodies and most have started the conference committee process. But there is a big question on Capitol minds. How will it end?
With less than two weeks to go, the two bodies are very far apart. House Republicans have staked their future on promises of two billion dollars of tax cuts. Senate Democrats don’t seem that interested. The Senate tax bill provides tax relief of approximately $400 million. There is barely a sentence in the House and Senate tax bills that are the same. Much of the House tax bill centers on tax reductions for corporations. Very little is carried in the Senate tax bill for the same purpose.
It is possible to end the session with no tax bill. Tax law, unlike spending allocations, is permanent law. Existing law will carry forward if no tax bill is approved, and revenue will continue to the state. All spending allocations, however, must be approved every two years.
There are a few areas in both House and Senate tax bills that deal with similar, yet different concepts. The area of farm property taxes is one of those. Both bodies addressed the issue but in very different ways. The Senate concept is to address the peaks associated with increased ag property taxes versus the 50 percent buy down approach of the House. MSGA has worked on the House language.
The following is the language of the Senate bill:
Sec. 8. [273.88] TARGETED AGRICULTURAL LAND TAX CREDIT.
45.24 Subdivision 1. Eligibility; amount of credit. (a) Property classified in whole or
45.25in part as class 2a agricultural property under section 273.13, subdivision 23, paragraph
45.26(b), in both the prior year and the current year, is eligible for a property tax credit if the
45.27gross property taxes payable on that portion of the property classified as agricultural
45.28increase by more than eight percent over the property taxes payable in the prior year on the
45.29same property and the amount of that increase is $200 or more. The amount of the credit
45.30shall equal the amount of the increase over the greater of eight percent of the prior year’s
45.31property taxes payable or $200. The maximum credit allowed under this section is $2,000.
46.1(b) For purposes of this subdivision, “gross property taxes payable” means property
46.2taxes payable excluding special assessments, penalties and interest, and assessed fees upon
46.3the property determined without regard to the credit allowed under this section.
46.4(c) Agricultural property shall not be eligible for the credit under this section if: (1)
46.5the property’s boundaries have changed in the current payable year; (2) an improvement
46.6was constructed upon the property; (3) valuation increases occurred relating to an
46.7incremental value increase due to a plat law provision or based upon the termination of an
46.8exclusion under section 273.11, subdivision 14a, 14b, or 14c; or (4) in the prior payable
46.9year, the property was enrolled under section 273.111, 273.113, or 273.114, or chapter
46.10473H or 40A, and that enrollment was removed for the current payable year.
46.11(d) If the amount of the credit exceeds the total of the net tax capacity-based gross
46.12property taxes on that portion of the property eligible for a credit under subdivision (a),
46.13the credit shall be limited to the net tax capacity-based gross property taxes payable on
46.14that part of the property classified under section 273.13, subdivision 23, paragraph (b).
46.15 Subd. 2. Credit reimbursement. The county auditor shall determine the tax
46.16reductions allowed under subdivision 1 within the county for each taxes payable year and
46.17certify that amount to the commissioner of revenue as part of the abstracts of tax listings
46.18submitted by the county auditors under section 275.29. Any prior year adjustments
46.19shall also be certified on the abstracts of tax lists. The commissioner shall review the
46.20certifications for accuracy and make changes as necessary, or return the certification to the
46.21county auditor for correction. The credit under this section must be used to proportionately
46.22reduce the net tax capacity-based property tax payable to each local taxing jurisdiction
46.23as provided in section 273.1393.
46.24 Subd. 3. Payment. (a) The commissioner of revenue shall reimburse each local
46.25taxing jurisdiction, other than school districts, for the tax reductions granted under
46.26subdivision 1 in two equal installments on October 31 and December 26 of the taxes
46.27payable year for which the reductions are granted, including in each payment the prior
46.28year adjustments certified on the abstracts for that taxes payable year. The reimbursements
46.29related to tax increments shall be issued in one installment each year on December 26.
46.30(b) The commissioner of revenue shall certify the total of the tax reductions
46.31granted under subdivision 1 for each taxes payable year within each school district
46.32to the commissioner of education, and the commissioner of education shall pay the
46.33reimbursement amounts to each school district as provided in section 273.1392.
46.34 Subd. 4. Appropriation. An amount sufficient to make the payments required by
46.35this section to taxing jurisdictions other than school districts is annually appropriated
46.36from the general fund to the commissioner of revenue. An amount sufficient to make the
47.1payments required under this section for school districts is annually appropriated from the
47.2general fund to the commissioner of education.
47.3EFFECTIVE DATE.This section is effective for property taxes payable in 2016
The following is the language of the House bill:
[273.1387] SCHOOL BUILDING BOND AGRICULTURAL CREDIT. Subdivision 1.
All class 2a, 2b, and 2c property under section 273.13,
subdivision 23, other than property consisting of the house, garage, and immediately
surrounding one acre of land of an agricultural homestead, is eligible to receive the credit
under this section.
For each qualifying property, the school building bond
agricultural credit is equal to 50 percent of the property’s eligible net tax capacity
multiplied by the school debt tax rate determined under section 275.08, subdivision 1b.
The preliminary credit under this section must be
noted on the notice of proposed property taxes under section 275.065, subdivision 3. The
actual credit amount must be reported on the property tax statement under section 276.04,
subdivision 2. The credit may be claimed by the property owner as an income tax credit as
provided in section 290.06, subdivision 38.
This section is effective beginning with taxes payable in 2016.
Ag finance bill last one out of the gate
The House ag finance bill passed the House floor on May 4. One of the amendments reduced the research and education section by $2 million back to a total of $8 million. The amendment redirected the $2 million to the U of Minnesota for avian influenza.
Several amendments offered during the floor debate dealt with the flu outbreak that has swept through the state over the last few months causing farmers to destroy millions of birds as they attempt to curb its spread, and threatening the market for the state’s turkeys. Minnesota leads the nation in turkey production.
Some of those amendments that were adopted would:
- add money to reimburse state agencies and local governments for their costs in responding to the outbreak such as overtime, travel, a portable lab for faster testing and more monitoring of wildlife and of the people who have had contact with infected animals;
- allow unused money to be moved between state agencies to cover costs as the need arises;
- provide an additional 12 weeks of unemployment benefits to poultry workers laid off as a result of the outbreak; and
- make poultry producers eligible for assistance from the disaster recovery loan program to replace their flocks, make building improvements and compensate them for lost revenue.