H.F. No. 130, as amended by the Conference Committee on February 7, 2011, makes fiscal year 2011 reductions to the general fund, reduces base appropriations for fiscal year 2012 and 2013, and makes certain health and human services and revenue savings changes permanent that were originally enacted for a single year.
Article 4 extends the property tax aid and credit reductions enacted by the 2010 Legislature by two years. For 2011 and 2012, tax aids and credits for counties and cities are equal to the lesser of the 2010 final payments after reductions or the 2011 certified amount. Beginning in 2013, the appropriations for Local Government Aid and County Program Aid return to the 2011 funding level prior to reductions. The property tax refund for renters will be calculated based on 15 percent of rent paid rather than 19 percent beginning with claims filed based on 2010 rents. Sustainable Forestry Incentive payments will be reduced to $7.75 per acre. The political contribution refund is repealed.
Article 5 conforms Minnesota income tax law with federal tax law changes made in the Patient Protection and Affordable Care Act, the Health Care and Education Reconciliation Act of 2010, and the Small Business Jobs Act of 2010, with certain exceptions. Conformity for tax year 2010 only to the Tax Relief, Unemployment and Insurance Reauthorization, and Job Creation Act of 2010 is also included, but requires additions for teacher expenses, college tuition, and computer contribution deductions.
Section 1 [Board of Trustees of the Minnesota State Colleges and Universities.] reduces MnSCU’s operations and maintenance base for FY 2012 and 2013 from $580,802,000 to $532,881,000 to reflect the additional reduction to the system, and is effective the day following final enactment.
Section 2 [Board of Regents of the University of Minnesota.] reduces the University of Minnesota’s operations and maintenance base for FY 2012 and FY 2013 from $578,370,000 to $533,764,000 to reflect the additional reduction to the system, and is effective the day following final enactment.
Section 1[Reimbursement for basic care services.] permanently reduces the payment rates under medical assistance for basic care services by an additional 1.5 percent. (This rate reduction is set to expire effective June 30, 2011.)
Section 2 [Department of Human Services.] reduces the general fund bases for the children and community service grants, emergency general assistance grants, and emergency Minnesota supplemental aid grants.
This article reduces appropriations in fiscal year 2011 for the Executive Branch, the Legislature, and the Constitutional Officers. The Commissioner of Management and Budget is required to allocate $100 million in reductions for fiscal year 2011 among Executive Branch agencies. The reductions to the Legislature and Constitutional Officers are unspecified amounts. Both sections in this article are effective the day following final enactment.
Section 1 [Fiscal year 2011 reductions.] Requires the Commissioner of Management and Budget to reduce appropriations made to Executive Branch agencies in fiscal year 2011 by $100 million, and cancels those reductions to the general fund. Specifies that no reductions under this section may be made to general or special education programs, the University of Minnesota, the Minnesota State Colleges and Universities, certain veterans programs, disaster relief, and employment assistance programs. The commissioner is required to report reductions made under this section to the Legislature.
The reductions made under this section are for fiscal year 2011 only.
Section 2 [Legislature and Constitutional Officers.] Provides reductions in general fund appropriations in fiscal year 2011 for the Senate, House of Representatives, State Auditor, Attorney General and Secretary of State.
Tax Aids and Credits
Section 1 [Political contribution refund.] eliminates a reference to the political contribution refund. The refund is repealed in section 14 of this article.
Section 2 [Credit reduction; towns.] maintains the market value credit reductions under current law for townships.
Section 3 [Market value credit reductions.] provides that the market value credit reimbursement for cities and counties in 2011 and 2012 cannot exceed the reimbursement that they received for 2010. Beginning in 2013, the market value credit reimbursement reductions for cities and counties will be the same as under current law.
Sections 4 and 5 [Political contribution refund.] strike references to the political contribution refund repealed by section 14.
Sections 6 and 7 [Renter refund.] reduces the percentage of rent qualifying as property taxes for the renter property tax refund from 19 percent to 15 percent permanently beginning with claims based on rent paid in 2010.
Section 8 [SFIA payment.] permanently sets the Sustainable Forestry Incentive Act payment at $7.75 per acre beginning in calendar year 2011.
Section 9 [CPA reductions.] provides that for 2011 and 2012, County Program Aid (CPA) distributions are equal to the lesser of the 2011 certified CPA distribution or the 2010 CPA final distribution after reductions.
Section 10 [LGA minimum and maximum.] provides that the Local Government Aid (LGA) minimum and maximum aids for 2013 will be calculated based on 2011 certified LGA. The minimum and maximum aids for 2014 and subsequent years will be based on the previous year’s certified aid.
Section 11 [LGA reductions.] provides that for 2011 and 2012, LGA distributions are equal to the lesser of the 2011 certified LGA distribution or the 2010 LGA final distribution after reductions. In 2011, the city of Houston will receive the amount that it was certified to receive in 2011 and in 2012 the city will receive the amount that it was certified to receive in 2011 minus its onetime 2011 aid base adjustment.
Section 12 [Aid appropriations.] sets the appropriation for LGA at its current law level of $527.1 million for aids payable in 2013 and thereafter. The appropriation for County Program Aid is also restored to $197.7 million beginning in 2013.
Section 13 [Property tax refund administration.] requires the Commissioner of Revenue to recalculate property tax refund claims that are submitted in 2011 using 19 percent of rent as property taxes paid. The refund claims must be recalculated and paid using 15 percent of gross rent. Claimants must be notified that the reduction was due to an action of the 2011 legislature.
Section 14 [Repealer.] repeals the political contribution refund.
Sections 1, 2, 5, and 6 [Federal conformity.] updates reference to the Internal Revenue Code as amended through September 27, 2010, for Minnesota tax purposes, incorporating the changes in the Patient Protection and Affordable Care Act, Public Law 111-148, in combination with the Health Care and Education Reconciliation Act of 2010, Public Law 111-152, and the Small Business Jobs Act of 2010, Public Law 111-240. Also conforms for tax year 2010 only to some of the provisions of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, Public Law 111-312. Provisions include:
Health Care Bills
· Increasing the AGI floor for the itemized deduction for medical expenses from 7.5 percent to 10 percent
· Exclusion for loan forgiveness for certain healthcare professionals
· Exclusion for employer-provided adoption assistance
· Exclusion for employer-provided health benefits for children up to age 27
Small Business Jobs Act
· Increase the capital gains exclusion for small business stock form 75 percent to 100 percent
· Reduce from ten to five years the recognition period for built-in gains tax
· Section 179 expensing
· 50 percent bonus depreciation, with 80 percent addback and five-year recovery
· Special rule for long-term contract accounting
· Increase in allowable deduction for start-up expenditures
· Remove cellular phones from listed property
· Rollovers from elective deferral plans to Roth IRA accounts
· Allow partial annuitization of nonqualified annuity contract
· Sourcing rules for income on guaranteed income
Tax Relief Act of 2010
Conforms to the following provisions for tax year 2010 only:
· Extends the ability to claim an itemized deduction for sales tax rather than income taxes paid
· Extends the increase in the federal adjusted gross income limit on the amount of qualified conservation easements that may be claimed as a charitable deduction
· Extends the authority for individuals age 70½ or older to transfer up to $100,000 from a traditional IRA or Roth IRA directly to a qualified charity without including the amount in taxable income
· Allows enhanced deductions for food and book contributions by C-corps
· Extends preferential treatment of dividends of regulated investment companies
· Extends the limit on basis adjustments in S corporation stock
Does not conform to the following provisions and requires the amount of the federal deduction for these items to be added to state taxable income:
· Bonus depreciation for property placed in service after September 8, 2010, and before January 1, 2012. (Minnesota would retain its current law requirement that taxpayers add back to taxable income 80 percent of the additional depreciation amount in the first tax year, and then subtract one-fifth of the amount added back in each of the five following tax years.)
· Teacher classroom expense deduction of up to $250
· Higher education tuition expense deduction
· Enhanced deduction for contributions of computers by C-corps
Sections 3 and 4 [Section 179 expensing conformity.] conforms Minnesota tax treatment of Section 179 expensing to federal tax treatment. Effective beginning tax year 2011.
Section 7 [Corrected Form W-2 not required.] provides that employers who have already issued W-2s that reported the cost of dependent health care coverage as taxable income are not required to reissue a corrected form.