Senate Tax Omnibus Includes Utility Property Tax Reform

This week, the Senate Tax Committee unveiled its tax omnibus bill (SF 826).  The Senate bill provides about $460 million in tax relief, mostly through reducing the state’s general tax levy (but slightly increasing the commercial/industrial class rate), increasing Local Government Aid and County Program Aid funding, and a few credits and sales tax exemptions.  This bill differs significantly from the House tax omnibus (HF 848), which includes over $2 billion in tax cuts (mainly through individual income tax credits, sales tax exemptions, estate and business tax reductions, exempting larger amounts of C/I and recreational property from the state general levy, and phasing out the general levy).

Unfortunately, the Senate did not follow suit of the House and include the refundable sales tax for local government construction materials in its omnibus.  The League of Minnesota Cities, which is leading the effort to pass this provision, plans to make a push to get the language adopted when the bill goes to conference committee.  MMUA Government Relations staff offered assistance in lobbying the Senate conferees to support this important cost-saving measure.

The Senate tax omnibus also includes utility property tax reform, which has been the subject of several previous articles in The Capitol Letter.  The omnibus contains a third iteration of the proposal, responding to some of the stakeholder feedback from previous hearings.  The bill now allows wind and solar energy to remain on their current production tax, but moves other electric generation machinery off the personal property tax onto the new production/capacity formula.  (Previous versions of this proposal moved all types of generation to the new formula).  Buildings/property where utilities’ electric generation machinery is housed is now changed to be locally—rather than state—assessed.  This change makes distribution and transmission the only utility property subject to state unitary valuation.  To help find a new option for taxing distribution and generation in the future, the bill asks the utilities that pay the new generation tax to report on the location, length, and capacity of their distribution and transmission lines.  Finally, the current language would make the changes take effect in 2016, giving the Department time to implement.

During testimony, no stakeholders spoke in favor or against these utility property tax provisions.  There is a sense that this utility property tax reform is a work in progress, and getting House support would be a heavy lift (given they have not discussed the issue at all).

Finally, of interest to utilities, the Senate tax omnibus contains language that would allow a municipality to bond for broadband infrastructure that is part of a public-private partnership.  A simple majority would be needed to pass the referendum in support of the investment.

The Senate has not yet taken up its tax omnibus on the floor, but is expected to do so next Monday.  Given the vast differences between the Senate and House (which passed its tax omnibus off the floor this Wednesday), and the fact that a tax bill does not have to pass this session due to the budget surplus, drawn out negotiations should be expected.


Update on Environment/Energy Conference Committees

A plan has been established to work out the differences in the Senate’s environment, agriculture, and economic development omnibus budget bill and the House’s two corresponding omnibus policy and budget bills:  energy /economic development and environment/agriculture.

The Senate’s omnibus bill will be worked out in two separate conference committees, both chaired by Sen. Tomassoni.  The energy/economic development provisions will be conferenced under bill number SF 2101, with Rep. Garofalo serving as House chair.  The environment/agriculture provisions will be conferenced under HF 846 with Rep. McNamara as House chair.  It’s likely that the conference committees will be appointed and start meeting next week.