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In conjunction with the increase in the per-pack cigarette tax that took effect July 1, the state levied a one-time tax on floor stocks of cigarettes. Most of the money from the floor stocks tax will serve as a backup source of funding for the state's share of building the new Minnesota Vikings stadium.

Tax on floor stocks of cigs raises $26.5 million for stadium

 Revenue Commissioner Myron Frans notes that one objective of a higher cigarette tax is to discourage smoking, which makes state reliance on the new revenue tricky. Frans also notes that reducing cigarette use was the main reason Gov. Mark Dayton, who generally dislikes regressive taxes, eventually supported the increase. (Staff photo: Peter Bartz-Gallagher)

Revenue Commissioner Myron Frans (Staff photo: Peter Bartz-Gallagher)

A one-time source of revenue is providing a $26.5-million financial backstop for the state in paying its portion of the cost of a new stadium for the Minnesota Vikings NFL team.

The money is part of a tax on floor stocks of cigarettes that was levied in conjunction with the increase in the per-pack cigarette tax that went into effect July 1.

Gov. Mark Dayton’s administration identified the tax on warehoused cigarettes as one of two sources of money to make up for the lagging collections from electronic pull-tabs, which lawmakers relied on in the 2012 Vikings legislation to pay its $348 million share of the $975 million stadium. The team and the city of Minneapolis are responsible for the remainder of the cost of construction.

The project is supposed to break ground in October. However Dayton has recently called for the Minnesota Sports Facilities Authority to conduct an extensive financial investigation of team owners Zygi and Mark Wilf following a New Jersey Judge’s finding that they committed fraud, breach of contract and violated that state’s civil racketeering law in an apartment development dispute.

During the legislative session, state officials were trying to fix a $12 million shortfall in the stadium’s reserve account that was projected for the fiscal year that ended on June 30. Minnesota Department of Revenue Commissioner Myron Frans in May proposed the tax on warehoused cigarettes as a way to bridge the gap. Taxing the floor stocks of cigarettes provides a disincentive for retailers to stockpile cigarettes when the per-pack sales tax increase goes into effect.

In addition to the $26.5 million for the stadium, the floor tax brought in $3.96 million to the state’s general fund for a total of $30.5 million. That was less than the $32.4 million that was originally projected in May.

In addition to the one-time floor tax, state lawmakers opted to designate $20 million a year from a change in the state’s corporate income tax to the stadium should any future shortfalls arise.

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