HF4

Purpose

Proposes a constitutional change to create a Minnesota Tax Relief Fund in the state treasury. The fund would hold surplus tax revenue and be used to return money to Minnesota’s taxpayers (property and income taxpayers) as onetime refunds each biennium.

Main provisions

• Establishes the Minnesota Tax Relief Fund in the state treasury. Its purpose is to set aside surplus tax revenue to be returned to taxpayers in each biennium.
• Trigger for transferring money: if a November forecast shows a positive unrestricted general fund balance at the end of the biennium, the commissioner must transfer from the general fund to the Tax Relief Fund the amount called the tax relief fund surplus. This surplus equals the amount by which projected revenues exceed projected expenditures by 105 percent.
• Exclusions and allowances: the calculation of projected expenditures cannot include any amount required by law to be set aside in a budget reserve. The legislature may still allocate projected revenues that do not exceed 105 percent of projected expenditures to a budget reserve.
• Eligible uses of Tax Relief Fund money:
  • Onetime refunds to property and income taxpayers that are not taxable under Minnesota law.
  • Or to offset the cost to the general fund for onetime tax reductions.
• Limits on refunds: refunds or offsets cannot exceed a taxpayer’s liability (you can’t give more back than you owe).

How it changes current law

• Creates a new constitutional mechanism (a Tax Relief Fund) to automatically capture and return surplus tax revenue when a forecast shows a surplus.
• Ties refund eligibility to a specific 105 percent threshold and to a forecast-based calculation, rather than discretionary annual budgeting alone.
• Sets strict rules about how refunds are delivered (one-time, not taxable, and limited to a taxpayer’s liability) and how funds can be used (only for refunds or one-time tax reductions).
• Requires a constitutional amendment (Sec. 9 in Article X) and voter approval.

Voter approval process

• The proposed amendment must be placed before voters at the 2026 general election.
• Ballot question asks whether the Minnesota Constitution should be amended to create a Minnesota Tax Relief Fund to return projected surplus tax revenue to income and property taxpayers.

Key practical implications

• Potential for automatic, periodic taxpayer refunds if surpluses exist as defined by the 105 percent rule.
• Encourages holding back tax surplus for one-time refunds rather than ongoing annual tax cuts or other expenditures.
• Could affect how the state uses projected revenue surpluses and manages budget reserves.

Relevant Terms - Minnesota Tax Relief Fund - tax relief fund surplus - positive unrestricted general fund balance - November forecast - general fund revenues and expenditures - 105 percent - budget reserve - onetime refunds - property taxpayers - income taxpayers - not taxable - onetime tax reductions - taxpayer liability - Article X, Sec. 9 (constitutional amendment)