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At Issue: Federal conformity and tax increases

Published (3/7/2008)
By Courtney Blanchard
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Two days after the House debated the omnibus tax bill late into the night, lawmakers took less than 30 minutes to pass a scaled-down and mollified bill from the Senate.

“This is truly a compromise bill,” said Rep. Chris DeLaForest (R-Andover). “We can all find something we don’t like.”

The Senate and House passed HF3201*/SF2935 on March 6.

Rep. Ann Lenczewski (DFL-Bloomington), chairwoman of the House Taxes Committee, requested a motion to concur with the Senate version. After several protests from members whose proposals didn’t make the final cut or who wanted more cuts, the bill passed 132-1. It only needs the governor’s signature to become law.

Sponsored by Lenczewski and Sen. Tom Bakk (DFL-Cook), the bill incorporates tax breaks passed by Congress into Minnesota law and includes familiar provisions from last year’s vetoed tax bill. But the version passed by the House on March 3 included several disputed issues which may resurface in another tax bill this session.

That night, lawmakers debated for about six hours on what was called a time-sensitive bill. The final version includes federal conformity laws that apply for the current tax season. Legislators feared they wouldn’t get it passed in time.

But federal conformity laws were packed among myriad other provisions from last year. After the governor vetoed two tax bills last session, Lenczewski said the best way to fast-track this bill was to grab the parts from last year’s bills that made it to the governor’s desk without much protest.

“These bills are not new ideas,” Lenczewski said. “They all had full hearings with full public testimony and made it through either the House or Senate or both.”

Yet, Republicans offered more than two dozen amendments to the bill.

“There definitely are controversial issues. One of the issues that’s in there is listed in the governor’s veto from last year,” said Rep. Dean Simpson (R-Perham), lead Republican on the tax committee.

One of the most contested provisions, sponsored by Rep. Sandy Wollschlager (DFL-Cannon Falls), would have increased property taxes on public utilities.

Last year, the Department of Revenue concluded that the value of power companies was lower than previously determined. The change will lower property taxes collected by surrounding local governments.

To offset the lost revenue, local governments would have been permitted to collect more property taxes from power companies, even though they are valued less than before.

Revenue Commissioner Ward Einess said at the Feb. 20 meeting of the tax committee that neither his department nor the governor supports it. He speculated that it could jeopardize the bill’s enactment. Republicans echoed the sentiment during floor debate.

Lenczewski said the utility provision in this year’s omnibus bill is not the same one that landed on the governor’s desk last year, and she thinks the governor will sign the bill.

“What’s in the bill is in the middle, it’s a middle-ground. It’s already giving up a lot of what Rep. Wollschlager and the host communities of these utilities wanted, and it’s not what the governor wanted either. And that’s kind of the nature of compromise,” she said.

The provision was stripped from the Senate version that was approved by the House.

A disappointed Wollschlager told the House, “We’ll try again.”

Republicans also targeted other sections in the bill, most of which would have allowed local governments to raise taxes. Members proposed amendments to wipe out a deed tax extension for Hennepin and Ramsey counties and new deed taxes for Anoka and Dakota counties.

House Minority Leader Marty Seifert (R-Marshall) said the bill contained too many tax increases.

“Here we go into veto city,” he said. “I can tell you with all due confidence, it’s going to get vetoed and the veto’s going to get sustained.”

The deed taxes and most of the local option sales taxes were removed in the Senate.

All but one Republican-sponsored amendment failed at the debate on March 3.

The House adopted an amendment proposed by Rep. Torrey Westrom (R-Elbow Lake), which would lessen the property taxes paid on small resorts. Another amendment nearly passed. Seifert proposed to strip local governments of their state aid if the city had a sanctuary ordinance.

According to the amendment, such an ordinance prohibits “public safety officials from undertaking any law enforcement action for the purpose of detecting the presence of undocumented persons, or to verify immigration status.”

Proposed twice, the amendment failed by one vote in a nearly hour-long afternoon debate and by two votes during the evening.

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