HF4907

Purpose

• The bill changes how the state taxes motor vehicle registrations and creates a mechanism to move money between state funds to support highway funding. It aims to modify the registration tax for passenger automobiles and hearses and establish a new General Fund transfer to the Highway User Tax Distribution Fund (HUTDF).

Main provisions

• General Fund transfer mechanism (Sec. 1)

  • The commissioner must calculate a supplement amount. It equals:
  • the estimated registration tax revenue for the current year (under the new 2025 terms) minus
  • the actual registration tax revenue collected in the current year.
  • Starting in fiscal year 2028, the calculation includes adjustments for any surplus or deficiency compared to the previous year.
  • By June 30, 2027 and every year after, this supplement amount must be transferred from the General Fund to the Highway User Tax Distribution Fund.

• Changes to how registration tax is calculated (Sec. 2)

  • For passenger automobiles and hearses, the registration tax is calculated based on:
  • whether the vehicle was initially registered in Minnesota before November 16, 2020 or on/after that date, with different percentages of the Manufacturer’s Suggested Retail Price (MSRP) and adjustments for a destination charge.
  • The MSRP and destination charge are used in determining the tax, subject to adjustments described in other parts of the bill.
  • The registrar must determine MSRP using:
  • the list price published by the manufacturer or other recognized price data sources, or the actual sales price if necessary.
  • if MSRP cannot be determined by these means, other available sources may be used.
  • Tax calculation uses information available to dealers and deputy registrars at the time the initial registration is submitted.
  • A depreciation-like schedule determines what portion of MSRP is used each year of the vehicle’s life. The schedule starts with a higher percentage in early years and declines over time (the bill lists a year-by-year structure, with percentages tied to the age of the vehicle).
  • For vehicles previously registered in Minnesota, there is a cap: the total amount due under this subdivision cannot exceed the smallest total amount previously paid or due on the vehicle.
  • Destination charge treatment:
  • The calculation must not include the destination charge for most vehicles, except for vehicles previously registered in Minnesota before November 16, 2020.
  • The calculation references the following terms and sources:
  • listed price data (MSRP)
  • Minnesota Statutes 2024 section 161.081 and Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a
  • “paragraphs e and f” contain the adjustments to the base calculation

What this bill seeks to accomplish (significant changes)

• Introduces a depreciation-based framework for calculating registration tax on passenger autos and hearses, replacing a flat or simpler flat-rate approach for many years of a vehicle’s life.
• Creates a new mechanism to fund highway needs by transferring money from the General Fund to the highway funding pool (HUTDF) based on differences between projected and actual registration tax revenue.
• Aligns MSRP-based tax calculations with specific rules about how MSRP is determined and which price data sources may be used.
• Adds annual reconciliation and a cap to ensure the total tax paid for a vehicle does not exceed the smallest amount previously paid on that vehicle.

Implementation and timing notes

• The general fund transfer to the HUTDF begins with the calculation of the supplement amount and occurs annually no later than June 30, starting in 2027 (and continuing thereafter).
• The MSRP-based tax schedule for passenger autos and hearses is determined by the vehicle’s initial registration date (before or after November 16, 2020) and applies to each year of the vehicle’s life.
• The law includes a cap on total tax for previously registered vehicles to avoid overcharging.

Potential effects

• Consumers could see changes in the way their annual vehicle registration tax is calculated, with a possibly higher initial tax and progressive reductions over time (depending on the exact year-by-year percentages).
• Ownership of older vehicles might result in lower taxes in later years due to the depreciation-style schedule.
• State highway funding could receive more stable or additional revenue via the General Fund transfer mechanism tied to forecast accuracy.

Relevant Terms - registration tax - passenger automobile - hearse - Manufacturer’s Suggested Retail Price (MSRP) - destination charge - initial registration - Minnesota Statutes 2024 section 161.081 subd. 4 - Minnesota Statutes 2025 Supplement section 168.013 subdivision 1a - list price information - depreciation-based tax schedule - year of vehicle life (first year, second year, etc.) - cap on total tax for previously registered vehicles - general fund - Highway User Tax Distribution Fund (HUTDF) - supplement amount - revenue forecast vs. actual revenue - adjustments (paragraphs e and f)