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Sparks: Tax relief will be a positive for 2M Minnesotans

Published 7:10pm Saturday, June 14, 2014

By Dan Sparks

The 2014 Legislative Session began with the news of a positive economic forecast for Minnesota and a $1.2 billion budget surplus. Just 12 weeks later, at the conclusion of a historically short session, the legislature enacted a series of common sense measures to continue the state’s job growth and create an economy that works better for everyone.

Most significantly, the legislature approved more than a half billion dollars in direct tax relief for nearly two million Minnesotans statewide. The tax breaks came in the form of income, property and sales tax relief and will put more money in the pockets of Minnesota homeowners, renters, businesses, farmers and local governments. By creating a tax system that is fair for everyone, Minnesota can stimulate a healthy business climate and a growing middle class.

The tax relief package also included a $150 million appropriation to the state’s budget reserve account and established a mechanism to maintain a robust “rainy day” fund to help Minnesota weather future economic ups and downs.

We also passed a $276 million supplemental budget package. The bulk of these investments focused on enhancing education opportunities from pre-K to college and providing much needed support for home- and community-based healthcare providers. Additional funding went to repairing roads damaged over the long winter and bolstering job growth initiatives around the state.

No less important, the budget will be structurally balanced in the long-term, with a $604 million positive balance projected for FY2016-17.

Aside from the budget, the primary task for the 2014 Session was to craft a bonding bill to put thousands of men and women to work improving deteriorating public infrastructure across the state. The final bonding package includes investments in housing infrastructure across the state, roads and bridges, local economic development projects and improvements at public colleges and universities.

The state is in its strongest financial position in more than a decade, jobs numbers have exceeded pre-recession levels and communities across the state are experiencing new economic growth. The measures enacted by the legislature and Governor this year will build on this momentum.

 Biodiesel

A 10% biodiesel fuel oil content increase will go into effect this summer. The increase won approval from the Biodiesel Task Force last fall, and is supported by producers and farmers. The auto industry and oil interests brought forward a proposal that would have eliminated our biodiesel content requirements altogether that bill was defeated in committee. I passed a bill that included changes supported by biodiesel advocates, and will help strengthen the industry moving forward. Biodiesel is a proven fuel that is good for the environment and our agriculture economy.

2014 Bonding Bill

The Senate and House reached an agreement on a $1.17 billion capital investment bill that includes $846 million in General Obligation bonds and an additional $200 million in one-time cash. The bill aims to improve the quality of life in Minnesota through investments in five key areas: business and economic development, housing and infrastructure, education, transportation, and public safety and corrections.

The bonding bill dedicates $448 million to economic development projects and programs including the Greater Minnesota Business Development and Public Infrastructure Grants Program. For transportation investments, $54 million is dedicated to local road improvements, while $34 million is headed to the local bridge replacement program. Another $67 million is heading to the Public Facilities Authority to fund clean water and wastewater infrastructure projects.

Local projects included in the bill:

Fountain Lake project – Full funding, $7.5 million, for the Fountain Lake project.

Blazing Star Trail – $433,000.00, for trail work from Big Myre park to Hayward

Shoot Star trail – $2.165 Million, this amount should allow us to complete the trail connection.

Hormel Institute project – language so the bonding dollars can be used for design and construction of parking lot.

Cedar River Watershed District – add to list of eligible entities to participate in the program. Shell Rock River Watershed District and the city of Austin were already eligible.

 Propane Shortage

A “perfect storm” of factors caused a propane shortage that resulted in price hikes this winter. The drastic price increases strained household budgets, particularly rural Minnesota communities that rely on propane to heat their homes. The State Emergency Operations Center established a hotline for distressed Minnesotans to call, and the Low Income Heating Energy Assistance Program (LIHEAP) increased payments from $500 to $1,000. And in the first week of session, the Senate passed the Low Income Home Energy Program (LIHEAP) appropriation bill.

Pending changes to Minnesota’s supply chain have created concerns about future shortages. This has remained a priority for me, as a member of the Legislative Energy Commission; I will be working with the industry and regulators on this over the interim.

 Lessard-Sams Outdoor Heritage Council Appropriations

$109.3 million was appropriated for outdoor and conservation projects funded by the Outdoor Heritage Fund. Included in the bill are $37.4 million for prairies, $31 million for habitats, $24 million for wetlands, and $16 million for forest projects.

The bill also included $700,000 for the Shell Rock River Watershed District. This funding will be used for the Albert Lea Lake Management and Invasive Species Control Structure. The benefits of this project will include improved aquatic and waterfowl habitat, invasive species management, and improved desirable fish population.

 Investing in Broadband

Legislation to create a new Border-to-Border Broadband Development Program successfully passed this session. The broadband bill establishes a broadband infrastructure fund to provide grants and loans to encourage development in unserved and under-served areas of the state. $20 million was appropriated for the grant program.

 $550 Million in Tax Relief to 2 Million Minnesotans

The Minnesota legislature approved more than $550 million in tax relief to nearly 2 million Minnesotans during the 2014 Legislative Session. The relief came in two bills: a federal tax conformity bill signed in March, providing $443 million in immediate income tax relief to 1 million Minnesotans, and a second bill signed in late May, providing $103 million additional property, sales and income tax relief to 940,000 middle-class Minnesotans.

Federal Conformity

Up to 400,000 Minnesota taxpayers filing taxes in 2014 saw lower tax bills – and in many cases, higher refunds – because Minnesota almost completely aligned its tax code with the federal government’s this year. Even more taxpayers will benefit in 2015. Beneficiaries include:

• 653,072 married couples filing jointly no longer have to pay the $2,000 “marriage penalty” beginning with Tax Year 2014, an average $115 tax savings.

• 125,000 Minnesotans paying student loans saw a more generous deduction this yea.

• 26,000 Minnesotans paying for child care expenses will see an average $80 tax savings from an improved child care tax credit in Tax Year 2014.

• 80,000 Minnesotans paying mortgage insurance premiums were able to deduct that expense from taxes.

• 30,000 Minnesotans paying for higher education tuition and expenses could deduct up to $4,000 of expenses.

• 347,000 low- and middle-income Minnesotans are eligible for an expanded Working Family Tax Credit, yielding an average tax savings of at least $334.

 Property Tax Relief

$45 million in direct property tax refund increases to:

 94,000 farmers. A one-time, maximum $205 supplement will be paid to all farmers receiving the Agricultural Homestead Market Credit in 2014. The Department of Revenue will directly pay these supplemental credits to each qualifying property owner by Oct. 15, 2014. The credit will be permanently increased beginning with Taxes Payable 2015. Under current law, the maximum credit is $345 for market values of $115,000, and it slowly phases out to a $230 credit at values of $345,000 and over. The new maximum credit will be $490 at a market value of $260,000 and over.

 500,000 homeowners. A one-time, 3% increase in all Homeowner Property Tax Refunds is provided this year, applicable to taxes payable in 2014 (refunds are paid beginning August 2014).

 350,000 renters. A one-time, 6% increase in all Renters’ Property Tax Refunds is provided this year, applicable to rent paid in 2013 (refunds are paid beginning August 2014).

Albert Lea Sales Tax

The Albert Lea sales tax extension was included in the tax bill. This sales tax was approved by local voters to raise $15 million for lake improvements. The law establishing this was set to expire but is coming up short of the fundraising goal. Changes in the tax bill will allow the tax to continue until that goal is met.

Volunteer first-responders

Fourteen counties will participate in a pilot project aimed at improving retention and recruitment of these crucial positions. The pilot includes a $500 stipend to be paid to each eligible first-responder in participating counties. Faribault and Freeborn were included in the pilot.

Business-to-Business Tax Repeal

Thomas Grundmeyer interned in my office this session

This bill also provided tax relief for Minnesota businesses by eliminating all three business-to-business sales taxes on April 1. These include a tax on electronic and commercial equipment repair and maintenance, telecommunications equipment, and warehousing and storage services.

Gift Tax Repeal; Estate Tax Relief

Since 2001, when the federal government made significant changes to its estate tax formula, Minnesota and other states have maintained differing estate tax policies.

Legislation passed in the Omnibus Tax Bill:

• Increases Minnesota’s estate tax threshold from $1 million to $2 million, closer to the federal threshold of $5.25 million. This change will be phased in over five years.

• Eliminates the gift tax enacted in 2013. (10% on lifetime gifts exceeding $1 million and $14,000 per year, per person.)

• Eliminates estate tax “rate bubble” that has caused some taxpayers with the lowest-valued estates to pay the highest rates.

Angel Investment Tax Credit

The Angel Investment Tax Credit is an important job-creation tool that was created in 2010. This year’s Tax Bill increased the current-year appropriation by $3 million, from $12 million to $15 million.

The bill also required half of the money be dedicated to Greater Minnesota and minority-owned or women-owned businesses. The Department of Revenue recommended this change, “In Greater Minnesota in particular, enhancing connections between entrepreneurs and investors, devoting more resources to marketing, and creating a designated tax credit set-aside will help make the program more widely accessible.”


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