Tax conferees reach deal on omnibus bill

The tax bill is now alive and in play. House and Senate conferees approved the bill on Saturday night that provides tax reductions and credits for businesses. It would also open up a roughly $140 million hole in the next two-year general fund budget if Gov. Mark Dayton signs it into law.

Onlookers in the lobbying and staff ranks were unanimous that the bill is far less expensive and controversial than the bills that were originally brought to the conference table. And Taxes Committee chairs Rep. Greg Davids and Sen. Julianne Ortman, both Republicans, said they shaped the bill with the intent of winning the DFL governor’s signature.

“We’d like to do a lot more. But we want to make sure the bill is signable, and it is,” Ortman said.

The bill jettisoned two expensive items: Phasing out the statewide tax on commercial and industrial property and eliminating the marriage penalty. By reducing the price tag, the conferees were able to abandon the House proposal to cut the renter’s credit, which drew scorn from DFLers. Davids said he conceded the renter’s credit because he wants Dayton to sign the bill. But he said he plans to push to reduce the rate in the future because the current law has a higher rate than the property taxes that are being paid.

The bill’s cost in the tails is likely to be the biggest objection for Dayton. One provision that widens the projected deficit for 2014-2015 is freezing the statewide commercial property tax. That alone opens up a $70 million hole in the 2014-2015 biennium.

The bill took scaled down approaches to a couple things. It tackles the long-standing complaint about the sales tax refund on capital equipment purchases by establishing a limited upfront exemption, effective July 1, for businesses with no more than 80 employees. Switching from the refund to an upfront exemption has long been a bipartisan aim, but lawmakers haven’t been able to find the money to pay the one-time cost due to budget constraints. The move would cost $19 million in the tails.

Another boon to Minnesota businesses is increased funding for the angel investor credit and the research and development tax credit.

Davids singled out several tax increment financing provisions, including one for the phase 2 expansion at the Mall of America.

“That would create more jobs than the bonding bill and the stadium bill combined,” Davids said.

Davids noted the tax bill takes on larger significance because legislative leaders are trying to adjourn the session soon.

“This is the bill that brings the whole session to an orderly close. If we get this one passed, then other things could start moving. I’ve always tried to stay away from the thought that these are all intertwined. But when you have one day left in session, I guess they’re all intertwined at this point,” Davids said.