Minnesota and Wisconsin officials say they are close to an agreement designed to return to simpler times when people who live in one state and work in the other only file one state income tax return.
Legislators from both states told revenue department officials they want the issue settled sooner rather than later. Revenue officials say most details have been worked out to restore the program, but Minnesota’s revenue commissioner said he needs to make sure his state does not lose money.
Minnesota Gov. Tim Pawlenty canceled a 40-year-old pact between the two states because Wisconsin had fallen 17 months behind in payments to Minnesota.
On Monday, Wisconsin Revenue Secretary Rick Chandler said that problem can be fixed by making quarterly payments to stay up with what his state owes Minnesota. Chandler and Minnesota Revenue Commissioner Myron Frans said just small issues remain to be resolved.
The program, expected to be back in place when tax returns are filed two years from now, would allow taxpayers to file returns only in their home state, even if they worked in the other state.
In the 40 years the earlier program was in place, Wisconsin always collected more tax from Minnesotans and owed Minnesota.
Both tax chiefs said their governors give restoring so-called tax reciprocity priority status.
“This will help 80,000 taxpayers,” Chandler said. “It is really a basic fairness issue.”
About 60,000 Wisconsin residents work in Minnesota, with 20,000 Minnesotans working in Wisconsin. Since Pawlenty canceled the agreement, they have had to file returns in both states.
Besides speeding up payments, Minnesota officials called for a study that would give them better insight into the program’s impact.
“We are very willing to address the concerns that Minnesota had,” Chandler said.
While both states face an Oct. 1 deadline to enact new rules in time for 2013 taxes, a dozen legislators meeting in the Minnesota Capitol gave a strong message to the administrations that they want an agreement finished this spring, well before the deadline.
Wisconsin Sen. Sheila Harsdorf, R-River Falls, make it clear that she expects the deal to be ready for the 2013 tax year.
Frans said Minnesota needs to better understand if reciprocity costs the state revenue. But, he added, he hopes for an agreement within two months.
“We have a few more details to nail down,” Chandler said.
“Details do matter,” Frans added, including whether Minnesota would lose money in the deal. “Is that something Minnesota is willing to cover?”
Harsdorf and Minnesota House Tax Chairman Greg Davids, R-Preston, told legislators and revenue department officials they would expect a report on reciprocity negotiations progress by April 15.
Harsdorf and Wisconsin Rep. Dean Knudson, R-Hudson, told of hundreds of small businesses in their districts that face accounting problems because they had to deal with both states.
“My constituents have been very frustrated,” Wisconsin Rep. Nick Milroy, D-South Range, said.
Wisconsin Sen. Bob Jauch, D-Poplar, said that concerns of either state could be satisfied if the agreement is flexible enough to be changed as time goes on. The old pact was not very flexible.
Wisconsin Rep. John Murtha, R-Baldwin, said that legislators and revenue officials should meet again in a year to see how things are going.