Minnesota taxpayers may file

Minnesota officials say they are ready to accept tax returns again and software companies have updated their products to take into account newly approved state tax breaks.

Revenue Commissioner Myron Frans and Gov. Mark Dayton this morning said work is completed after lawmakers late last month provided tax breaks that will give thousands of Minnesotans lower income tax bills.

The Revenue Department reports that all software companies have been provided updates, but taxpayers using desktop software should update their programs before filing returns. Tax preparers are being told to file returns that have been stacking up while their systems were updated.

Frans said a million taxpayers still need to file. The deadline remains April 15 even though several new tax cuts are available.

For the 1.5 million who have filed, he said that no action is needed. At some point after April 15, the Revenue Department will review all returns to determine if taxpayers are eligible for any of the new tax breaks. The state eventually will notify taxpayers if they are to receive larger refunds.

Ten new tax breaks were provided in the bill signed last month. They range from larger working family credits for families earning up to $40,000 a year to new mortgage insurance premium deductions to higher deductions for teachers who buy their own supplies.

Update: Tax officials suggest many taxpayers wait until April 3 to file

By Don Davis

Minnesotans entitled to share in $49 million of new individual income tax breaks should wait a week and a half to file tax returns, state revenue officials say.

“It will allow them to get their refunds quicker,” Assistant Revenue Commissioner Terri Steenblock said Monday.

If taxpayers who qualify for one of 10 new breaks file returns now, Revenue Commissioner Myron Frans added, it could be months before they get their refunds. If they wait to file until April 3, tax officials expect software and tax preparers to be ready to handle law changes state legislators and Gov. Mark Dayton approved Friday.

April 15 remains the income tax deadline.

On Friday, Frans urged people to wait until Monday to file returns if they might qualify for new tax breaks. On Monday, he and Steenblock said that waiting for everything to be ready is in the best interest of taxpayers and their department.

Steenblock said that even if taxpayers wait until April 3 to file, “we cannot guarantee every software vendor will be able to update their software.”

After April 3, she said, taxpayers filing returns electronically via software that does not include updates from the new law will be notified quickly that their returns were rejected. Returns will not be rejected if filed before April 3, but any refunds due taxpayers could be delayed for months.

Frans said he hopes to have a better idea Thursday about how long his department will need to finish the work reviewing tax returns for missed breaks.

In many cases, Revenue Department employees hope to make changes themselves and increase refunds for those who qualify, without taxpayers taking any further action. In other cases, the department will notify taxpayers they must file an amended return to take advantage of the law.

“This is a very complex task we are undertaking,” Steenblock said.

Steenblock said the Revenue Department is working to change tax forms and instructions and briefing software venders on the changes. Next, she said, internal department processes will be updated, eventually followed by the department reviewing returns already filed to see if taxpayers may qualify for the new tax cuts.

The tax bill lawmakers passed and Dayton signed on Friday set aside $1 million for the department to undertake the job.

While tax cuts overall amounted to $443 million, just $49 million of them affect individual income tax returns being filed now.

“About 1 in 10 taxpayers probably will be able to benefit,” Frans said, meaning that up to 275,000 people will split the $49 million in new tax breaks.

Taxpayers who do not qualify for the new tax breaks can go ahead and file returns now.

Frans said that he expects Minnesotans to have a lot of questions, so his department is increasing the number of operators at its call center: (651) 296-3781 and (800) 652-9094.

Minnesotans will benefit from two tax changes when filing returns next year, Frans said.

A working family credit for people earning up to $40,000 a year was expanded a bit this year, but Frans said that it expands much more next year.

Also, he said, about half of Minnesota taxpayers will benefit next year from a change in how the state treats married couples. The change comes when the state conforms to federal law that gives married couples a tax break.

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New Minnesota tax breaks
Minnesotans may take advantage of 10 newly enacted tax breaks. All are designed to more closely match state tax law with federal law, which results in taxpayer savings.
– Working family credit: New law moves the credit closer to the federal earned income tax credit for families earning $25,000 to $40,000 annually.
– Mortgage insurance deduction: Minnesotans making less than $110,000 a year may deduct mortgage insurance premiums.
– Mortgage debt forgiveness exclusion: Homeowners whose mortgage lenders agreed to accept less than they owed on their homes may exclude the amount of debt the lender forgave.
– Educator expenses deduction: Kindergarten through 12th grade school employees who buy classroom supplies with their own money may deduct up to $250 of the purchases.
– Higher education tuition deduction: Those who paid tuition and fees to a post-secondary school may be able to deduct up to $4,000 if income is below $80,000 for individual returns or $155,000 for joint returns.
– Student loan interest deduction: Students may be able to deduct up to $2,500 of student loan interest if returns show incomes below $75,000 for individual returns or $155,000 for joint returns.
– Education savings account exclusion: Taxpayers with a child in grades K-12 who used distributions from a Coverdell Education Savings Account may exclude those payments from income.
– National Health Corps scholarship exclusion: Taxpayers who received a National Health Service Corps scholarship or Armed Forces Health Professions scholarship and financial aid may be able to exclude those payments from income.
– Employer-provided education, adoption and transit assistance exclusion: Those whose employers provide education, adoption and transit assistance may be able to exclude some of those benefits from income.
– Tax-free individual retirement account exclusion: Taxpayers 70.5 years old and older who donate to charities from their IRAs may exclude up to $100,000 from income.
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More information is available at www.revenue.state.mn.us. Click on orange “tax law changes” button to reach a page with several fact sheets.

 

Qualify for new tax breaks? Wait to file

Frans

By Don Davis
Minnesota revenue officials will not be ready to pay Minnesotans for newly enacted tax breaks until April 3.

Revenue Commissioner Myron Frans today advised Minnesotans who may qualify for one of 10 new individual income tax breaks not to file income tax returns until then. He said that is when tax preparers, software companies and his Revenue Department should be ready.

Taxpayers who do not qualify for the new tax breaks can go ahead and file returns, he added.

“About 1 in 10 taxpayers probably will be able to benefit,” he said, meaning that up to 275,000 people will split the $49 million in new tax breaks.

Minnesotans who already have filed their returns and qualify for one of the new breaks do not need to do anything, Frans said. The Revenue Department will contact them and let them know about their new, and bigger, refunds and whether they need to file an amended return.

However, Frans said, the department does not know how soon employees will be able to comb through returns to find those who are owed bigger refunds.

In many cases, Revenue Department employees hope to make changes themselves and increase refunds. In other cases, the department will notify taxpayers they must file an amended return to take advantage of the law.

“This is a very complex task we are undertaking,” Assistant Revenue Commissioner Terri Steenblock said.

The tax bill lawmakers passed and Gov. Mark Dayton signed Friday set aside $1 million for the department to undertake the job.

Tax returns must be filed by April 15.

New and newly expanded state income tax cuts are:
– Working Family Credit.
– Mortgage insurance deduction.
– Mortgage debt forgiveness.
– Educator expenses deduction.
– Higher education tuition deduction.
– Student loan interest deduction.
– Education savings account exclusion.
– National Health Corps scholarship exclusion.
– Employer-provides education, adoption and transit assistance exclusion.
– Tax-free individual retirement account exclusion.

State advice: Don’t file income tax returns this weekend

Bakk, Dayton

By Don Davis

Minnesotans who have not filed their state income tax returns should wait until next week.

State Revenue Commissioner Myron Frans said that will give tax officials time to provide more specific advice about how a tax-cut bill legislators approved Friday will affect taxpayers. He said Minnesotans who already have filed returns, about half of taxpayers, will be notified if their taxes fall because of the newly minted law.

“If you have not filed your tax return yet, I would advise you to wait until Monday,” he said.

People who have yet to file may want to learn what tax breaks could affect them, Frans said, but warned: “Regardless of the little delay, they have to meet the April 15 deadline.”

He said some returns can be modified by the department with no further action by taxpayers. In other situations, Frans’ department will notify taxpayers who need to file an amended return to take advantage of the tax breaks.

Frans plans to announce more specifics Monday, but on Friday said that taxpayers especially may want to delay filing returns if they may have deductions or credits related to mortgage insurance and education. Up to 16,000 more families who earn up to $45,000 a year also may qualify for an expanded Working Family Credit.

During the weekend, Frans’ department will make adjustments to account for the changes. The Revenue Department also will work with tax preparers and tax software companies to help them make needed changes that they hope will be incorporated by April 1.

The scramble is needed because Minnesota legislators approved $443 million of tax cuts Friday, 10 months after they raised taxes more than $2 billion and less than a month before the tax deadline. Many of the tax breaks, which could affect up to 500,000 Minnesotans, can lower taxes on returns now being filed.

Senators approved the bill 58-5, with the House following 126-2.

Sen. Patricia Torres Ray, D-Minneapolis, said she voted against the bill because she favors more education spending instead of the tax cuts.

The votes came a day after Republican senators delayed debate on the bill, saying they only received the bill an hour before debate was to begin.

Even before the Thursday delay, senators waited two weeks after the House passed its tax bill.

“We took a little bit of time to look at the ramifications so we could make some improvements,” Senate Tax Chairman Rod Skoe, D-Clearbrook, said. “And we did.”

More cuts may be coming. “We are not done yet,” Skoe said, adding that he expects a second tax bill.

Skoe argued against deeper tax cuts now, and in favor of putting more in the state budget reserve, because the last time the state was in good financial condition then-Gov. Jesse Ventura led the charge to send tax rebate checks to Minnesotans. Soon after that, Skoe said, the state began running into financial problems.

The chairman’s provision adds $150 million to the state budget reserve, which Senate Majority Leader Tom Bakk, D-Cook, said is important. He said it “assures fiscal stability for the state going forward.”

The tax bill rewrites some state tax laws to conform to federal law, which would lower thousands of Minnesotans’ income taxes. That will save taxpayers more than $200 million.

Saving businesses more than $200 million are the canceling of business sales taxes approved last year as well as a warehousing tax that was to take effect April 1. The sales taxes included those placed on farm equipment and other commercial repair work and on some on technology sales,.

“I call it a good start,” said Rep. Paul Anderson, R-Starbuck, who like many Republicans wanted more taxes lowered.

Republicans frequently reminded Democrats that they increased taxes more than $2 billion last year, but only want to cut taxes $443 million this year (a figure that grew slightly Friday as last-minute changes were made to the bill).

“It is not often that we get a second chance to recover once we have jumped off the ledge,” Sen. Paul Gazelka, R-Brainerd, said, adding that many mistakes were made last year when business taxes were increased.

Senate OKs tax cut

By Don Davis

Senators took a day to read a 62-page bill that would cut taxes $432 million, then passed it this afternoon.

After senators approved the bill 58-5, the House planned to take it up later today. That would provide time for Revenue Department workers to make changes so Minnesotans filing income tax returns before the April 15 deadline will not have to amend their returns.

The action came a day after Republican senators delayed debate on the bill, saying they only received the bill an hour before debate was to begin.

Even before the Thursday delay, senators waited two weeks after the House passed its tax bill.

“We took a little bit of time to look at the ramifications so we could make some improvements,” Senate Tax Chairman Rod Skoe, D-Clearbrook, said. “And we did.”

Skoe said one of the major improvements senators made was to increase the Working Family Credit that helps low-income Minnesotans.

The Senate vote came after three-and-a-half hours of debate. Two conservative Republicans and three liberal Democrats opposed it.

Sen. Patricia Torres Ray, D-Minneapolis, said she voted against the bill because she favors more education spending instead of the tax cuts.

More cuts may be coming. “We are not done yet,” Skoe said, adding that he expects a second tax bill.

Skoe argued against deeper tax cuts now, and putting more in the state budget reserve, because the last time the state was in good financial condition then-Gov. Jesse Ventura led the charge to send tax rebate checks to Minnesotans. Soon after that, Skoe said, the state began running into financial problems.

A rush was on to pass the tax bill as soon as possible as the income tax deadline nears.

Revenue Commissioner Myron Frans said that “every day counts” as taxpayers increasingly are filing tax returns.

Frans said that his staff will work through the weekend to update documents to take into account changes in the bill that affect returns now being filed. The Revenue Department also will work with tax preparers and tax software companies to help them make needed changes.

Later today, Frans was expected to give taxpayers guidance about whether they should go ahead and file tax returns or wait until the changes can be implemented. Senate Majority Leader Tom Bakk, D-Cook, said on Thursday that some should wait until next week to file.

The tax bill rewrites some state tax laws to conform to federal law, which would lower thousands of Minnesotans’ income taxes. It also would overturn business sales taxes approved last year, including those placed on farm equipment and other commercial repair work and on some on technology sales, as well as a warehousing tax that was to take effect April 1.

During Friday tax debate, several GOP senators offered amendments to take money from a planned $150 million budget reserve increase to support other tax breaks. All failed.

GOP senators unsuccessfully tried to kill a planned $63 million Senate office building.

Republicans frequently reminded Democrats that they increased taxes more than $2 billion last year, but only want to cut taxes $432 million this year.

“It is not often that we get a second chance to recover once we have jumped off the ledge,” Sen. Paul Gazelka, R-Brainerd, said, adding that many mistakes were made last year when business taxes were increased.

He said he would vote for the bill “in hope that we will do more in the future.”

Taxes for up to 500,000 Minnesotans could fall under the bill. More than $200 million in income tax breaks for individuals would happen because state law would match federal tax law and another $200 million-plus in sales tax reductions would be delivered to businesses.

The bill makes more than 50,000 low-income families eligible for larger benefits under the Working Family Credit designed provide work incentives. More than 280,000 students would qualify for new student loan deductions.

The legislation would provide tax breaks for adoptive parents, homeowners facing foreclosure and teacher classroom expenses. More breaks would be available to investors in greater Minnesota, women-owned and minority-owned businesses.

It also eliminates a gift tax passed last year and easing the burden of the estate tax, both of which made it costly to pass small businesses and farms to the next generation.

The House passed a $503 million tax cut March 6 and Dayton wanted taxes cut $616 million. Another tax bill is expected yet this legislative session, which must end May 19, and it could include deeper cuts.

Senate tax bill holds for a day

Skoe, Bakk (Senate Media Services photo)

By Don Davis

Tax cuts may come to those who wait.

Democrats who control the Minnesota Legislature were fired up and ready to cut taxes Thursday, but Senate Republicans refused to allow a $432 million tax-cut bill come up for a vote, saying they and the public had not had time to read it.

“I think as a senator, I have the right to read the bill,” said Sen. Scott Newman, R-Hutchinson, saying he first saw the bill an hour earlier when the 62-page bill still was hot off the copy machine.

“Folks, they want us to do it and do it right,” Sen. Bill Ingebrigtsen, R-Alexandria, told fellow senators about the desire of Minnesotans that lawmakers know what is in the bill before voting. “We need more than a couple of hours; Minnesotans expect that.”

Both senators and representatives are expected to vote on the bill today.

Revenue Commissioner Myron Frans said his department had been working on making the many changes needed as more and more taxpayers file returns ahead of their April 15 deadline, but that work stopped Thursday when the tax bill stopped.

“Every day matters,” Frans said, adding that he could not give specifics about how the day delay will affect taxpayers.

About 40 percent of Minnesota taxpayers file their income tax returns between April 1 and April 15, and on Thursday, Frans said so many changes in tax laws are contained in the stalled bill that his department, tax preparers and software companies face a mountain of work to keep up.

Minnesotans who already have filed returns may need to amend them if they want new tax cuts contained in the bill.

Senate Majority Leader Tom Bakk, D-Cook, suggested that taxpayers who think they might benefit from the changes should wait until next week to send in their returns. Frans and Gov. Mark Dayton refused to make any such recommendations.

Most cuts in the Senate bill center on two areas:

– Rewriting some state tax laws to conform to federal law, which would lower many Minnesotans’ income taxes.

– Overturning business sales taxes last year’s Legislature approved, including those placed on farm equipment and other commercial repair work, some on technology sales and a warehousing that was to take effect April 1.

House and Senate bills would make more than 50,000 low-income families eligible for larger benefits under the Working Family Credit designed provide work incentives. More than 280,000 students would qualify for new student loan deductions.

The legislation would provide tax breaks for adoptive parents, homeowners facing foreclosure and teacher classroom expenses.

During a hastily called news conference, Dayton thanked Bakk and Senate Tax Chairman Rod Skoe, D-Clearbrook, for trying to pass the tax bill Thursday, which was a day after a deadline the governor had given lawmakers.

Two days earlier, Dayton chastised Democratic Senate leaders for delaying the bill. He said Bakk refused to bring up the tax bill until lawmakers approve a new Senate office building.

On Thursday, Bakk accompanied Dayton to the news conference as they criticized Republicans for delaying the bill.

A two-thirds majority of senators was needed to suspend the rules, and without GOP votes, there were not enough Democrats to begin the tax debate. The vote was 38-28.

“There are provisions in this bill that some of our members have not seen…” Senate Minority Leader David Hann, R-Eden Prairie, said. “We think tomorrow is just fine.”

The Senate is to take up the tax bill when it convenes at 9:30 a.m. today, and if it passes, the House expects to take it up later in the day. House Republicans gave no indication they plan to delay the bill.

The Senate Taxes Committee passed the bill Thursday morning, minutes before the full Senate convened.

Skoe said that the bill balances a desire to trim taxes with the need to increase state budget reserves.

“The state is in the best financial state it has been in since 1999 and I do not want the state to return to the financial uncertainty of the 2000s,” Skoe said.

Skoe also has been part of a Senate effort to increase state budget reserves $150 million to provide a cushion in case there are fiscal problems.

The House passed a $503 million tax cut on March 6 and Democratic Gov. Mark Dayton wanted them cut $616 million. Another tax bill is expected yet this legislative session, which must end May 19, and it could include deeper cuts.

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Key points of a Minnesota Senate tax bill include income and business tax cuts.

– Total net tax cuts: $432 million.

– Change state tax law to match federal law and increase Working Family Tax Credit: $226 million.

– Repeal business tax cuts passed last year: $232 million.

– Repeal gift tax and increase estate tax threshold: $30 million.

Note: Individual tax cut figures do not add up $432 million because bill also includes some minor revenue increases.

Hann

Legislature inches toward tax cuts

By Don Davis

Minnesota lawmakers edged closer to passing millions of dollars in tax cuts today.

The Senate Taxes Committee passed a bill this morning chopping taxes $432 million, giving lawmakers a chance to pass the measure by day’s end.

“There are a lot of positives here,” Mike Hickey of the National Federation of Independent Business said before committee members approved the tax bill on a voice vote.

Senate Taxes Chairman Rod Skoe, D-Clearbrook, said that the bill balances the desire to trim taxes with the need to increase state budget reserves.

“The state is in the best financial state it has been in since 1999 and I do not want the state to return to the financial uncertainty of the 2000s,” Skoe said.

Skoe also has been part of a Senate effort to increase state budget reserves $150 million to provide a cushion in case there are fiscal problems.

The House passed a $503 million tax cut on March 6 and Democratic Gov. Mark Dayton wanted them cut $616 million. Another tax bill is expected yet this legislative session, which must end May 19, and it could include deeper cuts.

Most cuts in the bill being considered today centered on two areas:

– Rewriting some state tax laws to conform to federal law, which would lower many Minnesotans’ income taxes.

– Overturning business sales taxes last year’s Legislature approved, including those placed on farm equipment and other commercial repair work, some on technology sales and a warehousing tax that was to take effect April 1.

Republicans generally supported the tax cuts, and wanted more, but were critical of what they called “mistakes” the Democratic-controlled Legislature passed last year when it tacked sales taxes onto many businesses.

“This is akin to robbing $100 from somebody on the street and giving them $2 back,” Sen. Roger Chamberlain, R-Lino Lakes, said.

Today’s work follows harsh comments Dayton made Tuesday, claiming Democratic Senate leaders were holding up a tax cut bill in hopes of getting House approval to construct a new Senate office building. Within 90 minutes of Dayton’s comments, Senate Majority Leader Tom Bakk, D-Cook, and Skoe called in reporters and said they planned to vote on the tax bill today.

Time is important, Revenue Commissioner Myron Frans said, because 40 percent of Minnesotans probably will file income tax returns in April.

If the tax bill passes today, Frans says his staff will work through the weekend to update computer software and make other changes. He said private tax businesses and software companies also can make needed changes in time to help tax filers.

Senators expected to take up the bill this afternoon, and the House could return later in the day to consider it. If the House does not agree with the Senate bill, which is similar to the House bill, it would go to negotiations and delay implementation of the tax cuts.

Up to 500,000 Minnesotans could see lower taxes under the Senate bill. The bill includes more than $200 million in income tax breaks for individuals and another $200 million-plus in sales tax reductions for businesses.

The Senate tax bill is smaller than the House measure mainly because the upper chamber delays a business sales tax exemption on capital equipment purchases from taking effect until mid-2015, generating $64 million in additional tax revenue.

House and Senate bills would make more than 50,000 low-income families eligible for larger benefits under the Working Family Credit designed provide work incentives. More than 280,000 students would qualify for new student loan deductions.

The legislation would provide tax breaks for adoptive parents, homeowners facing foreclosure and teacher classroom expenses.

One of the major tax savings that could come from the state conforming to federal law is not included in the bills: the so-called marriage penalty.

State law forces married Minnesotans to pay more than if they were not married. While the House and Senate would change state law and lower taxes for income taxes due in 2015, taxes being paid now would not be affected. Republican efforts to make the change for current returns failed.

Another GOP attempt that failed would have reimbursed farmers who paid sales tax on farm equipment repairs since the tax began last year. Other business that paid new taxes also would not get refunds.

“While I am happy and pleased that we are addressing these oversights from last session … in the meantime great harm has been done to many businesses,” Chamberlain said.

St. Paul Pioneer Press reporter Bill Salisbury contributed to this story.

Senate tax bill arrives after Dayton lobs stalling complaint

Dayton

By Don Davis

Minnesota Gov. Mark Dayton on Tuesday used his first public appearance since Feb. 8 to accuse fellow Democrats who lead the Senate of stalling a tax-cut bill until they won approval for a new Senate office building.

An hour and a half later, Senate Majority Leader Tom Bakk of Cook and Tax Chairman Rod Skoe of Clearbrook showed off a tax bill they hope senators pass Thursday, without a building agreement. They denied that Dayton’s comments changed their plans.

Dayton, who has been in a body cast since Feb. 10 hip surgery, walked to a podium aided by crutches Tuesday afternoon and began to rip Bakk for telling him and House Democratic leaders that he would not allow a tax bill to pass until the House rules committee approves a new Senate building.

“I’m very, very, very disappointed they would not pass a bill,” Dayton said.

The House passed a $500 million tax cut March 6. It would stop three sales taxes businesses pay as well as conform to federal tax laws.

Dayton and Revenue Commissioner Myron Frans said that tax cuts needed to be finished by today or Minnesotans would struggle to get tax breaks that come from matching state and federal laws.

Skoe had been saying that senators wanted more time to investigate implications of various tax provisions, and they would wrap up a bill by month’s end.

Democratic and Republicans senators must agree to suspend Senate rules before the Thursday vote will occur.

When Bakk and Skoe sat down with reporters after Dayton’s comments, they began talking about the tax bill, not mentioning Dayton. Bakk did not directly answer the question, asked multiple times, about whether in meeting with Dayton and House Speaker Paul Thissen he linked the tax bill with a new building.

Thissen, D-Minneapolis, agreed with Dayton that Bakk linked the two.

“We have all along urged the House rules committee to act …” Bakk said when asked about the tax-building link. “We don’t understand why the House rules committee hasn’t acted.”

The only action needed before a new Senate office building is constructed is House rules committee approval. However, House members have joined Dayton in expressing reservations about the building.

Bakk said it is needed.

Due to an extensive Capitol renovation project, Bakk said, senators will not have offices or a chamber in which to meet in 2016 if something is not done. Construction will continue at least through 2016.

The renovation is stealing space from the Senate, and doubling what the governor’s office occupies, and there will not be enough room for senators and staff in the finished building, the majority leader said.

Bakk said the Senate will lose 38,000 square feet to renovation.

While representatives have not decided whether a new building is even needed, Dayton said he thinks a modest one should be built. But he was not happy that Bakk linked lower taxes with it.

Dayton said he returned to the Mayo Clinic in Rochester on Monday to have the body cast removed, a week earlier than planned, because he needed to get back to the Capitol to fight for the tax cuts. “It was time for me to come back because of the deadline.”

“I can’t kick any field goals for a while,” he said, but other than using crutches most of the time he is doing well.

He may not be kicking field goals, but he kicked senators’ tactics. “These are DFL legislators, I’m sorry to say. … It’s just inexcusable.”

Dayton said an entire half-hour meeting earlier Tuesday was about the Senate building because the Senate insisted on discussing it before taxes.

“I need to take this to the people of Minnesota,” Dayton said, adding that he plans to start meeting with legislators about taxes today.

Thissen said Bakk wanted to include Senate building approval in the tax bill. Skoe and Bakk said there is no mention of the building in their bill, which they would not give to reporters Tuesday night.

Bakk said that taking up the tax bill by Thursday would be an “extraordinary accomplishment.” A second bill, including some tax cuts, is expected before lawmakers adjourn for the year in May.

The Senate bill will would cut taxes nearly $70 million less than the House, but would add $150 million to the state budget reserve, Skoe said.

Bakk, Skoe

Make it clear: Dayton administration wants state law ‘spring cleaning’

By Don Davis

A Minnesota car owner who wants a massive bright yellow bug deflector, with purple polka dots, could install one under a provision Gov.  Mark Dayton proposes.

Now, state law regulates bug deflectors’ size and color.

Dayton also wants to eliminate a law that specifies the size of containers in which fruit is sold and one that requires the state agriculture commissioner to round up any wild boar that gets loose in Minneapolis or St. Paul.

The Dayton administration Tuesday proposed changing more than 1,000 laws that the governor says no longer are needed.

Commissioner Tony Sertich of the Iron Range Resources and Rehabilitation Board called it “spring cleaning.”

During his State of the State speech a year ago, Dayton said this year’s Legislature should hold an “unsession,” with lawmakers overturning outdated laws and taking other steps to make government easier to understand and more relevant to citizens.

With Dayton homebound after hip surgery, Sertich handled the duties of introducing the governor’s unsession ideas, along with an executive order Dayton signed to require all state agencies under his jurisdiction to use plain language in their work.

The order, which does not apply to legislators and the courts, would require workers to use “language commonly understood by the public, write in short and complete sentences (and) present information in a format that is easy to find and easy to understand.”

Sertich said state workers are undergoing training about how to simplify their communication.

While Dayton could take the plain language action on his own, legislators must vote to change laws. Sertich said that he gave legislative leaders copies of the 1,000 changes Dayton wants to make to laws.

While some like the bug deflector law may be funny, most are serious.

For instance, small businesses must keep unemployment insurance records for eight years. Dayton would require keeping them half as long.

The Democratic governor also will continue to speed up issuing state permits, Sertich said.

Many new rules now can take anywhere from nine months to two years to take effect. Dayton pledges changes will allow that to happen in half the time.

Revenue Commissioner Myron Frans said a tax bill making its way through the House is another example of simplification. The bill matches many state tax laws with those from the federal government, a process he said not only simplifies the process but saves Minnesotans money by accepting tax breaks Washington allows.

State Websites also will get easier to navigate, Sertich promised.

Military veteran Michelle Ambrose said that a few years ago she struggled to learn about her benefits when going onto the Veterans Affairs Department site. Recently, she said, she needed to do the same thing and found the site much clearer. She said she received help from a department worker within 30 seconds.

Campers who Sertich invited to share their experiences with the Department of Natural Resources Website said they now can reserve a campsite relatively quickly compared to the old DNR process.

Democratic legislative leaders said they like the Dayton proposals.

“Gov. Dayton has rightly put a focus on ways we can make our government work better for the people of Minnesota with his ‘unsession’ legislative agenda,” House Speaker Paul Thissen, D-Minneapolis, said.

Republicans tended to be more willing to overturn recent laws they do not like.

“While the governor is wasting time worrying about old laws that are largely ignored, Republicans are proposing real solutions to fix the mistakes of 2013,” Senate Minority Leader David Hann, R-Eden Prairie, said. “We plan to use the unsession to stop construction of the extravagant … Senate office complex and repeal hidden business-to-business taxes that are increasing prices on everyday purchases.”

‘People have a right to expect lower property taxes’

By Don Davis

The future of state aid that many local Minnesota governments depend on may be at stake in the next few weeks as property taxes appeared to be headed up.

By mid-December, city, county and other local officials decide how much property tax they will collect. Those decisions come on the heels of the Democratic Legislature and governor sending them large bundles of new money in the name of property tax relief.

If taxes go up, local governments may see less state aid in the future. That could lead to service cuts or property tax increases, much like Minnesotans have experienced for a decade.

“People have a right to expect lower property taxes,” state Rep. Paul Marquart, DFL-Dilworth, said.

But many Minnesotans probably will not see lower bills.

A state Revenue Department report earlier this month indicated that property tax levies statewide could rise nearly 2 percent statewide. Cities expect to raise tax levies 2.1 percent, counties 1.5 percent, townships 2.1 percent, schools 2.6 percent and other taxing districts 2.3 percent.

Democratic Gov. Mark Dayton and others are concerned that the preliminary numbers show 63 percent of cities and 77 percent of counties plan higher property tax levies.

Democrats did not think that would happen. They thought that millions of dollars in additional state aid they sent to local governments would result in property tax cuts.

“There will be a number of legislators who seize on any increase as evidence that local governments are (big) spenders and they will take every dollar and spend it and get more and more and they will take every dollar they can get,” Dayton said. “So they are going to undermine the case we have been making.”

With Dayton saying that increases will “seriously undermine our case,” Revenue Commissioner Myron Frans plans to talk to local government leaders who propose raising tax levies in the hope that they will trim their tax levies.

The latest Revenue Department numbers come from preliminary property tax levy decisions local officials have made. Each governing body needs to make a levy final decision by mid-December. State law does not permit preliminary levies to go up, only stay the same or shrink.

Statewide, preliminary levies always are higher than the final ones. They usually fall a percentage point or less, which if it happens this year tax means levies would rise a bit.

The preliminary levies are a mixed bag, Dayton said. “We reduced property tax increases, but our goal was to reduce property taxes.”

Senate Tax Chairman Rod Skoe, DFL-Clearbrook, said that even if levies increase, “the average property taxpayer probably will not see an increase.”

A higher levy does not always mean higher homeowner taxes. For instance, if business property value increases more than home value in a community, businesses would pay a higher percentage of taxes and home property taxes could fall. The situation is different in each community.

Frans and Dayton said that, despite their concerns, they understand the need for higher taxes.

Frans said that in Ada, for instance, he learned that when Local Government Aid was falling in the past 10 years, the city decided to buy a new police car every six years instead of every five years. With higher LGA coming, city officials plan to return to the old purchase schedule to try to prevent equipment problems.

Even if property taxes rise, Gary Carlson of the League of Minnesota Cities and those representing other forms of local government say that new money is needed after 10 years during which state aid often fell, or at least did not keep up with inflation.

The levies announced this month, at less than a 2 percent increase, easily could have been 6 percent or 7 percent hikes without the additional state aid, Carlson said.

Salary freezes, hiring caps and other cuts have hampered local governments, Carlson said. “At some point, and maybe it already has started, there is some pressure to fill some of those jobs, to undertake some of those projects, to kind of get back to the traditional flow of services.”

Local governments have held down property taxes for years, said Beau Berentson of the Association of Minnesota Counties. “We are still dealing with a decade of underinvestment, under funding.”

Skoe said his area is a good example of county-to-county differences.

Beltrami County’s preliminary 2014 levy is the same as the current one. But next door in Clearwater County, officials decided to sell a hospital and have related debt that needs to be paid, leading to a preliminary 14 percent levy increase.

One factor influencing higher taxes is that unexpected local aid cuts over the years have made local officials leery about trusting state government to come through with money that was promised.

“I have had that specific conversation on many occasions,” Frans said.

Given that lack of trust, some local budgets are built without counting on full state aid, possibly triggering larger-than-needed levy increases.

With increases looming, some say, there could be a fight to keep Local Government Aid and County Program Aid as is.

“I do think it makes it harder for local governments to make the argument that LGA is about property tax relief,” House Speaker Paul Thissen, DFL-Minneapolis, said.

Local Government Aid was created in 1971 to give cities without much property wealth (and, thus, a harder time collecting property taxes) the ability to provide fundamental services such as police and fire protection. It has become critical for many cities, such as Minneapolis, St. Paul and Greater Minnesota communities.

A formula designed to determine financial need means most Twin Cities suburbs receive little, if any, LGA. Suburbs generally have more property wealth than communities that receive LGA, so they can collect more property taxes.

“A lot of suburban legislators are going to have doubt,” Marquart said. “’Is that the right investment to make?’ I’m going to be honest, that is a fair question.”

If the final levies next month show increases, Marquart said, the news will “send a very clear message and determine the future of Local Government Aid.”

“The state of Minnesota is watching,” Marquart warned.

Democrats “came through” for local governments, said Larry Jacobs from the University of Minnesota’s Humphrey School of Public Affairs, “and the taxes still go up. I think this was an overreach on the part of local governments. I think they might have lost an ally in the Capitol.”

Most importantly for local governments, Jacobs added, “this could be an end to what had been a pretty nice gravy train.”

 

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New money the governor and Legislature approved sending to local Minnesota governments next year:

– $140 million in homestead credit refunds and renters’ credits, which goes directly to Minnesotans

– $129 million in sales tax exemptions for cities and counties (a figure cities and counties say actually will be half that size)

– $80 million increase in Local Government Aid, raising the total to $507 million in 2014

– $40 million increase County Program Aid, raising the total to $105 million next year

– $10 million in township aid, a new program

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Property taxes, mostly levied by local governments, increased from $4.4 billion in 2002 to $8.3 billion this year.

Early indicator: Property taxes headed up

By Don Davis

A preliminary report shows local governments plan to increase property taxes next year.

Tuesday’s Minnesota Revenue Department report indicates cities expect to raise taxes 2.1 percent, counties 1.5 percent, townships 2.1 percent, schools 2.6 percent and other taxing districts 2.3 percent. Within those overall statewide numbers, some governments expect increases, others plan tax cuts.

The numbers are the first indicators of where property taxes may go.

Revenue Commissioner Myron Frans said that preliminary figures like those released Tuesday generally shrink before final property tax levies are approved by year’s end.

“We do know they always come down,” Frans said in an interview about the preliminary and final numbers, adding that there is no way to predict how much.

Tuesday’s report puts into question a prediction Democratic Gov. Mark Dayton and Frans made in July that property taxes would fall 1.5 percent in 2014.

Dayton and Frans credited 2013 Democratic initiatives such as increasing state aid paid to cities, counties and townships. The two predicted in July that after property taxes rose 86 percent since 2002 that next year will be the first time they have decreased in more than 10 years.

“This is reversing a decade-long trend,” Frans proclaimed at the time.

On Tuesday, Frans said that he will continue to work with cities and counties to find ways to reduce preliminary property tax numbers his department had just released.

Frans singled out Minneapolis and Dakota County for lowering taxes for 2014. “We are seeing some really good choices.”

But there was another side: “I am disappointed with some that raised their levies.”

The commissioner said his department will not know the precise property tax picture until February.

In July, Senate Minority Leader David Hann, R-Eden Prairie, said that he doubted the Dayton and Frans predictions of tax cuts. He said local officials make property tax decisions and state officials could not predict what would happen.

Another tax figure released Tuesday showed better news.

Minnesota Management and Budget reported state October revenues were up nearly $56 million from expectations. Half of the jump came in individual income taxes.

“It confirms the trendline of our expanding economy,” Frans said, noting that higher employment reported in recent months resulted in more taxes.

DFL, GOP don’t agree on special legislative session agenda

By Don Davis

REDWOOD FALLS, Minn. — Democrats are willing to overturn a new sales tax on farm implement repair when the Legislature next month meets to appropriate money for disaster relief, but Republicans say they want to get rid of two other new taxes, too.

Democratic Gov. Mark Dayton told reporters after he spoke at Farmfest Thursday that he and legislative leaders are looking at a Sept. 9 special session to provide state funding for local governments in 18 counties that were affected by late-June storms and flooding.

While Dayton had insisted that only disaster relief be considered during the one-day session, he said he now is willing to allow lawmakers to overturn the farm implement repair tax.

House Speaker Paul Thissen, DFL-Minneapolis, and Senate Majority Leader Tom Bakk, DFL-Cook, sent GOP leaders a letter Thursday asking them to agree to hold the special session to disaster relief and the farm tax.

GOP leaders Rep. Kurt Daudt of Crown and David Hann of Eden Prairie replied that they also want to eliminate a tax on goods stored in warehouses. A GOP legislative spokeswoman would not say if the two would insist on the warehouse tax vote.

Rep. Tim Kelly, R-Red Wing, has led an effort to overturn the warehouse tax because it is delaying expansion decisions by businesses, including Red Wing Shoes in his community. He and governor candidate Rep. Kurt Zellers, R-Maple Grove, also want to get rid of another business tax.

“Along with storm relief and repealing the farm equipment tax, we’re calling on Dayton and DFL legislative leaders to repeal the warehousing tax and the sales tax on equipment for all Minnesota businesses during the special session,” Kelly said.

Governors generally require Democratic and Republican legislative leaders to sign an ironclad agreement as to what will be debated in a special session. Only a governor can call a special session, but only legislators can decide what is debated.

Dayton said that he could consider taking the warehouse tax out of state law next month, but only if Republicans come up with funds to replace those lost by the action. He did not address the third tax Republicans want to eliminate.

Rep. Pat Garofalo, R-Farmington, also called for lawmakers to change their minds on building a $90 million “Taj-Mah Senate building” and a law allowing some childcare workers to unionize.

Rep. Ryan Winkler, DFL-Golden Valley, has suggested that his bill raising the minimum wage also should be considered.

“We’ve got to keep a lid on this,” Dayton said. “Otherwise, it will be in session until December.”

The Democratic governor said he would like elimination of the farm implement repair tax to be retroactive to when it began July 1. Ag leaders at Farmfest said they have fielded many questions and complaints about the new tax.

Revenue Commissioner Myron Frans said farmers pay $2 million a month in the sales tax on farm implement repairs.

Rep. Paul Torkelson, R-Hanska, was happy with the possibility that the tax will be removed from law.

“They never should have been put in the law in the first place,” Torkelson said.