Instead of having their state income tax dollars go into the General Fund, Minnesota businesses and individuals could be allowed to dedicate them to affordable housing projects.
Taxpayers would not be completely free from contributing to the state's coffers. Rather, in exchange for a donation, individuals and businesses would see their state income tax burdens decreased by the amount equivalent to 90% of the contribution. So if a person with a $1,000 state income tax burden made a $1,000 donation, the person's burden would be reduced by $900 and he or she would still owe $100 in state income taxes.
The program could also be applied to the premium tax paid by insurance companies.
On Thursday, the bill was approved 11-1 by the House Housing Finance and Policy Committee and referred to the House Taxes Committee. Its companion, SF1866, is sponsored by Sen. Carla Nelson (R-Rochester) and awaits action by the Senate Taxes Committee.
"Unless we're willing to think outside of the box, be innovative, try new things and make new kinds of investments, we will never meet this moment," Howard said.
Minnesota has a shrinking supply of housing for low-wage workers, and the private marketplace is not building enough of it, said Miranda Walker, senior program and loan officer for the Greater Minnesota Housing Fund.
She and other housing advocates say the tax credit program could make affordable housing development easier.
Under the bill, donations would be collected by the Housing Finance Agency. Total donations each year could be capped at about $27.8 million, an amount equivalent to $25 million in tax credits.
Taxpayers could donate between $100 and $5 million. Individuals and businesses that donate more than their tax burden in a given year could get tax credits for up to 10 years.
The Housing Finance Agency would be required to award equal amounts of grants and loans to projects in the Twin Cities and outside the metro, to the extent possible. It would need to dedicate 35% of the funds for housing for people with incomes below 50% the area median and 15% of funds for people with incomes below 30% of the area median.
For a Twin Cities family of four, the area median income is $103,400.