Tax breaks fuel session's first new law

Minnesotans filing 2014 state tax returns will find that many of the tax changes allowed on their federal forms can transfer to the state forms.

Gov. Mark Dayton signed a new law Jan. 24 in response to congressional action late last year to continue 2013 tax year conformity provisions for the 2014 tax year. These were then adopted into Minnesota tax code.

“The bill I signed into law today will put more money in the pockets of over 200,000 middle-income Minnesotans,” Dayton said in a press release. “It also clarifies the law that will provide state funding for the Destination Medical Center – a project that is vitally important for our state’s economy and quality of life.”

The law is sponsored by the two tax chairs, Rep. Greg Davids (R-Preston) and Sen. Rod Skoe (DFL-Clearbrook). It is effective Jan. 25, 2015, unless otherwise noted.

Dayton said that approximately 200,000 Minnesotans will benefit from the provisions that include:

• a higher education tuition tax break;
• a tax deduction for teachers who purchase books, art supplies and other materials for their classrooms;
• a deduction for mortgage insurance premiums paid by homeowners; and
• creation of the Achieving a Better Life Experience Act, which will allow disabled or blind Minnesotans to set up a tax-free ABLE account. When established it will allow people with disabilities to save up to $100,000 without losing government benefits, and make withdrawals for expenses such as housing, health care and employment training. 

A provision effective following compliance by the City of Rochester clarifies the funding mechanism for the Destination Medical Center project — provisions that were enacted in 2013.

Though the matter involves a strictly technical correction, it has potentially large implications. Without this action, the amount of private investment required to leverage a projected 20-year total of $455 million in state aid might have jumped from approximately $6 billion to roughly twice that sum.

Legislators were forced to revisit the issue following a September 2014 opinion from Attorney General Lori Swanson that held that the language in statute required the calculation of each year’s state subsidies on the basis of the previous year’s private investment totals alone, rather than cumulatively.

The law’s cost to the General Fund for the tax conformity provisions is estimated to be nearly $20 million for fiscal year 2015 and a projected $22.52 million for fiscal year 2016.

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