HF2591

HF2591 (Legislative Session 94 (2025-2026))

Fifth tier of individual income tax at a rate sufficient to offset lost federal Medicaid funds established.

Related bill: SF2867

AI Generated Summary

Purpose of the Bill

The bill aims to address potential revenue shortfalls caused by changes in federal Medicaid funding by introducing a new, higher income tax tier in Minnesota. This fifth tax tier would be applied to the highest income earners to offset the budget impact of losing federal support.

Main Provisions

Fifth Tier Income Tax: The bill proposes the establishment of a fifth tier in the Minnesota individual income tax system. The rate for this tier is not explicitly listed but is to be set by the Minnesota commissioner of revenue.
Income Brackets and Tax Rates: The bill outlines the tax rate schedules for different filing categories:
- Married individuals filing jointly and surviving spouses will see their income taxed in increasing brackets, with the highest bracket over $1,667,000 being subjected to the new fifth tier rate.
- Unmarried individuals and heads of households will have similar bracket structures, with the highest incomes taxed at the new fifth tier rate.
Calculation for Part-Year Residents: Individuals who are not residents of Minnesota for the entire year will compute their Minnesota tax based on their income sourced within the state and other factors.

Significant Changes to Existing Law

The bill modifies the existing Minnesota Statutes by amending section 290.06 to include the new tax bracket designed to raise additional state revenue.
The tax rate for the fifth tier would be calculated to cover fiscal losses due to federal Medicaid policy changes that impact state funding.

Relevant Terms

Income tax
Fifth tier
Tax bracket
Medicaid funding
Tax calculation
Revenue offset
Minnesota tax law

Bill text versions

Introduction PDF file

Past committee meetings

Taxes on: April 03, 2025 10:15

Actions

Date	Chamber	Where	Type	Name	Committee Name
March 19, 2025	House	Floor	Action	Introduction and first reading, referred to	Taxes

Citations

[
  {
    "analysis": {
      "added": [
        "Establishes a fifth tier of the individual income tax to offset lost federal Medicaid funds."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill modifies the tax brackets and rates for individual income tax as outlined in section 290.06.",
      "modified": [
        "Adjusts the taxable income brackets and corresponding tax rates for different filing statuses."
      ]
    },
    "citation": "290.06"
  },
  {
    "analysis": {
      "added": [
        "A clarification for application of additions in tax computation."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill references adjustments related to tax computation for non-resident taxpayers, specifically section 290.0131.",
      "modified": [
        "Details adjustments to sections affecting federal adjusted gross income calculations."
      ]
    },
    "citation": "290.0131"
  },
  {
    "analysis": {
      "added": [
        "Includes Minnesota assignable portion of subtractions for specific federal interests."
      ],
      "removed": [
        "None"
      ],
      "summary": "Refers to subtractions applicable in tax computation for non-resident taxpayers under section 290.0132.",
      "modified": [
        "Clarifies the subtractions applicable for Minnesota tax computation."
      ]
    },
    "citation": "290.0132"
  },
  {
    "analysis": {
      "added": [
        "None"
      ],
      "removed": [
        "None"
      ],
      "summary": "This citation relates to allocation and assignability provisions affecting income tax for part-year residents.",
      "modified": [
        "Reflects changes in assigning incomes for tax purposes."
      ]
    },
    "citation": "290.081"
  },
  {
    "analysis": {
      "added": [
        "None"
      ],
      "removed": [
        "None"
      ],
      "summary": "Refers to provisions used for determining the assignability of income under section 290.17.",
      "modified": [
        "Clarifies existing allocations used in tax calculations for part-year residents."
      ]
    },
    "citation": "290.17"
  },
  {
    "analysis": {
      "added": [
        "Introduces provisions for electing entities to pay taxes under specific sections."
      ],
      "removed": [
        "None"
      ],
      "summary": "This bill includes a reference to section 289A.08 regarding elected tax payments for certain entities.",
      "modified": [
        "Incorporates additional guidelines for qualifying entities under this election."
      ]
    },
    "citation": "289A.08"
  }
]