May 14, 2018
FINAL WEEK AT LEGISLATURE
The Legislature faces a heavy workload in its final week as it rushes toward the constitutional adjournment of May 21. Conference committees are concluding their work, and negotiations among leaders continue. The biggest tasks facing the Legislature are passage of a supplemental budget, bonding and tax bills.
The Tax Conference Committee released its joint House and Senate agreement Friday. Among the major provisions:
- The corporate tax rate is reduced from 9.8% to 9.1% by tax year 2020.
- The lower two rates for personal income taxes are reduced from 7.05% to 6.85% and from 5.35% to 5.25%.
- Full conformity to Section 179, allowing for immediate expensing of equipment for small businesses and farmers.
- Repeal of the corporate alternative minimum tax.
- Move to federal gross adjusted income tax base for individual income taxes.
- Full conformity with most business provisions including net interest limitation.
- Does not fully conform to bonus depreciation but continues current law of 80% add-back and 5-year depreciation.
- Does not include international income provisions of GILTI/FDII. Taxes a portion of deemed repatriation.
Here are links to the spreadsheet and bill's language.
The bill includes some important tax reforms to offset but not completely mitigate the tax increases that will occur from federal tax conformity. Some Minnesota business taxpayers may see a tax increase under this plan, depending on a company's specific circumstances. The federal tax conformity with the largest revenue impact is the cap on interest expensing and net operating loss changes for pass-through entities. The proposal is likely to face stiff opposition from Governor Dayton who has proposed a net tax increase of $12 million in FY 2018/19 and $420 million in FY 2020/21 to pay for additional spending. The Governor's tax bill included a business tax increase of nearly $1 billion in FY 2020/21 and used those dollars to reduce taxes for lower-income individuals.
Please contact your legislators and underscore that the federal tax reform presents an opportunity – and need – to rightsize Minnesota's tax structure for the benefit of employers and employees. Our current two-year budget is already set with spending up 11.4% from the previous biennium. The state general fund is enjoying a budget surplus for the fifth consecutive year. This is not the time to raise taxes on private-sector employers. Encourage them to include the tax rate reductions contained in the Tax Conference Committee bill.
WEEKLY 'AT THE CAPITOL' VIDEO
Click here for a report from Cam Winton, our director of labor/management policy.
Standard to bring harassment claim (HF 4459, Peppin, R-Rogers/SF 4031, Housley, R- St. Marys Point): WE OPPOSE
Under existing law, individuals must prove that conduct is either "severe or pervasive" to create legal grounds for a hostile work environment claim. This standard is intended to allow valid claims to proceed without flooding the courts with lawsuits. The proposed legislation, summarized here, would eliminate that standard and would undermine the entire body of case law that courts have developed under the "severe or pervasive" standard. Other groups, including local governments and the education community, also are weighing in with concerns. The provision is a House position in the public safety article of the omnibus supplemental budget bill. The Senate has expressed concerns about the far-reaching impact of the proposal that has had only one hearing and minimal input. Please contact your legislators today and underscore that while this legislation is well intentioned it will have serious legal implications for all employers in our state.
Court victory in Minneapolis litigation
The Minnesota Chamber achieved a significant victory in our ongoing lawsuit challenging the paid sick and leave ordinance enacted in July 2016 by the Minneapolis City Council: The city cannot enforce the ordinance on employers located outside city limits, Judge Mel I. Dickstein ruled in Hennepin County District Court. The ordinance remains intact for employers located within the city. Dickstein's order on May 10 made a previous temporary ruling permanent. The City of Minneapolis has indicated it will appeal.
The Minnesota Chamber has argued, among other things, that a patchwork of local ordinances will create an administrative burden for employers. The ordinance would have required that companies outside Minneapolis track employees who work in the city and allow them to accrue sick leave – at a rate of 90 minutes per week – if they meet a threshold of 80 hours of work per year in Minneapolis. Dickstein underscored that point in his ruling. The judge wrote that this benefit for a non-Minneapolis worker "pales when weighed against the imposition of recordkeeping and administrative obligations incurred by companies located outside the city." The ordinance "casts its net too far," he added.
We're disappointed that the ordinance remains in force for employers located within the city, but the ruling is noteworthy for employers located outside Minneapolis across the state and country. We will keep you abreast of the city's appeal of this ruling.
In the news: Court: Minneapolis cannot enforce sick leave rules for employers outside city (Minneapolis Star Tribune)
Strengthening medical price transparency law (HF 3893, Anderson, R-Plymouth/SF 3480, Draheim, R-Madison Lake): WE SUPPORT
Health care costs are raising out-of-pocket costs for health insurance policyholders, forcing them to be better consumers of health care but often with incomplete information about cost. This bill would strengthen existing law, requiring providers and insurers to disclose the cost of medical procedures upon request and within 10 days. It also requires a posting of the costs for basic procedures and the disclosure of any facility fees or other charges to be paid by patients. The bill has passed the Senate and is scheduled for a vote Tuesday on the House floor.
Constitutional amendment (SF 3837, Newman, R-Hutchinson): WE SUPPORT
The Minnesota Chamber is working with a broad group of stakeholders that supports dedicating 100% of auto parts sales taxes to transportation through a constitutional amendment. The Senate bill has been passed by the Transportation Committee and is awaiting action by the Taxes Committee. In the House, the bill was approved last week by the Rules, Taxes and Ways and Means committees and awaiting a floor vote. Become engaged in the Vote Yes 4 Roads campaign. Encourage your legislators to give Minnesotans the opportunity to fix our crumbling roads and deficient bridges to make our transportation system safer and less congested.
Child-care regulations (HF 3403, Peterson, R-Lakeville/SF 3310, Weber): WE SUPPORT
The number of licensed in-home family child-care providers has decreased by almost 30% across the state, according to the Minnesota Department of Employment and Economic Development and the Center for Rural Policy and Development. This bill would reduce redundant insurance paperwork and bring transparency to state regulations. The Senate passed the bill last week 66-0. The House will take up the measure this week.
Eliminate wild rice/sulfate standard (HF 3280, Lueck, R-Aitkin/SF 2983, Eichorn, R-Grand Rapids): WE SUPPORT
The Minnesota Pollution Control Agency reached an impasse among stakeholders to protect wild rice from sulfate discharged by wastewater treatment plants and withdrew its proposed wild rice regulation from the rule-making process. A bill that eliminates the standard altogether passed both the House and Senate but was vetoed by the governor. We look forward to working with stakeholders to find a compromise that protects the natural resource without hindering economic development.
June primary election: (HF 1393, Fenton, R-Woodbury/SF 1264, Housley, R-Stillwater): WE SUPPORT
Minnesota's statewide primary election is currently conducted in August, which results in a very low turnout. Moving the primary to June would allow more time for meaningful examination of the candidates and the issues leading up to the general election. As a result, the Legislature would likely be more representative of the entire population. The bill was heard last year in Government Operations and Elections Policy Committee and will likely be added as an amendment this week to the elections policy bill, HF 3221, O'Driscoll, R-Sartell.