Tax savings part of conformity bill

The recently enacted federal Patient Protection and Affordable Care Act allows the cost of health insurance coverage of dependents and adult children to age 26 to be excluded from federal taxable income.

While hoping to conform the state to the exclusion, Republican members of the House Taxes Committee cautioned Jan. 18 that their support of HF79 should not be viewed as an endorsement of the controversial new federal law.

The bill would, for tax year 2010 only, allow Minnesotans a similar exclusion on state taxes. The bill was amended so that employers who have prepared and distributed W-2 forms are not required to create new ones. There would be a $200,000 cost to the state’s General Fund in fiscal year 2011 to provide for the tax break.

“My motivation is simply dollars; it is something we can do quickly and make life better for a lot of folks,” said Committee Chairman Greg Davids (R-Preston), the bill’s sponsor. He called the measure “technical,” and that quick action was needed because it would affect W-2 forms that by law must be distributed to employees by Jan. 31.

There was concern that a vote to approve the measure would be viewed as an endorsement of the new federal reform.

“We are strictly on the mechanical processes of filling out our W-2s, and not on whether to adopt any provision of the federal health care act?” asked Rep. Keith Downey (R-Edina).

Davids tried to reassure him that this was a vote to only conform to current federal law and to lower taxes. But Downey said approving this tax conformity is “actually one of the first steps to adopting more completely and fully the federal health care reform.”

Although, Rep. Ann Lenczewski (DFL-Bloomington), who headed the committee the previous two biennia, called the vote a support of health care reform, she said the committee should set aside its political differences for the good of state residents. “These provisions are tax cuts for Minnesotans.”

The bill awaits action by the House Ways and Means Committee. Its companion, SF47, sponsored by Sen. Julianne Ortman (R-Chanhassen), awaits action by the Senate Taxes Committee.