Greetings from the Floor,
The first day of the 2020 legislative session was Tuesday. Floor sessions were pretty routine this week with bill introductions and referrals between committees being the major actions. All bills from last session are still in play this year, and begin in the last committee that had possession of them. I introduced one bill this week to appropriate $17.29 million from General Obligation bond sales to MSUM for renovations to Weld Hall.
The Minnesota Chamber of Commerce’s annual Session Priorities dinner was held Tuesday night. This is an event where local chamber, community, and business leaders get an opportunity to hear from the four legislative caucus leaders and Gov. Walz about their priorities for the session. The Speaker of the House, Rep. Hortman, spoke about the need to fund early learning programs, and pass an insulin affordability bill. Senate Majority Leader, Sen. Gazelka, expressed his support for additional tax cuts including income taxes on Social Security. Gov. Walz spoke about the need to continue improvements to the state’s regulatory climate, and that government and businesses must work together for meaningful reforms. I want to thank the Fargo-Moorhead-West Fargo Chamber, Downtown Moorhead Inc., and the cities of Moorhead and Dilworth (especially Mayors Judd and Olson) for attending this year.
The only committee meeting I had this week was the Tax Committee on Thursday. Chair Marquart presented a bill to address an issue that’s come up related to Section 179 business equipment expensing. The federal Tax Bill passed in 2017 increased the allowance for business equipment expensing to $1 million in the first year. It also eliminated a deferral for income taxes assessed on the money “gained” by the exchange of old personal property for new personal property. This is referred to as “like/kind exchange”. For example, if an old piece of equipment valued at $20,000 was exchanged for a new piece of equipment valued at $60,000, that $20,000 would be considered a profit and subject to income tax. However, because that $20,000 was put toward the new $60,000 piece of equipment, the income tax on the $20,000 would be deferred. Last year’s Minnesota Tax Bill allowed for expensing up to $1 million, but retained an existing state policy that the expensing must be spread out over 5 years. This policy was retained to control the overall cost of the 2019 state Tax Bill (the full cost of first year $1 million expensing in Minnesota would be over $220 million in the 2020-2021 biennium). Last year’s state Tax Bill also conformed with the new federal tax law and eliminated the “like/kind exchange” tax deferral on personal property (both the state and federal Tax Bills maintained the “like/kind exchange” income tax deferral on real property). The result is that businesses were not only hit with a tax assessment on the money “gained” by the exchange of the old equipment, but they were also limited in how much they could expense on the new equipment in the first year because of Minnesota’s 5 year expensing schedule.
Chair Marquart’s bill would allow the income tax assessed from the “gain” on old equipment to be paid over 5 years (following the same schedule as current law for the new equipment expensing). This comes at a cost of $9.1 million in the 2020-2021 biennium. All members on the Tax Committee took votes to fully conform with federal law around Section 179 expensing last year. However, without other measures proposed in the 2019 Tax Bill to tax offshore profits and proprietary information held offshore, the revenue to pay for full Section 179 expensing was not available in the final bill that the House and Senate negotiated.
I’m looking forward to working toward a strong Bonding Bill this year to get good projects done around the state. My local priority is the Clay County Transfer Station. The county has waited for a couple of years to get this project done, and the cost has gone up with inflation. The time is now to complete this critical piece of infrastructure for the continued growth of Clay County.
Thank You for the Opportunity to Serve,
Ben