HF5040

Purpose

Create a new tax intended to recover money gained through fraud against state programs or appropriations. The tax is set at 100% of the amount obtained by fraud and is aimed at individuals or organizations found guilty of fraud, those the state commissioner determines have obtained funds by fraud, and those who profit from others involved in fraud.

Key Definitions

• Fraud: the intentional use of deceit or dishonest means to obtain state money from a state program or appropriation, excluding refunds for overpayments of taxes.
• Commissioner: the Minnesota commissioner of revenue.
• Scope: covers convictions in state or federal court and also applies when the commissioner determines that money was obtained by fraud, including where someone receives compensation for participating in the fraudulent activity.

Tax Imposed (Main Provisions)

• Tax amount: 100% of the amount obtained by fraud.
• Applicability:
  • To individuals or organizations convicted by a state or federal court of fraud.
  • To individuals or organizations the commissioner determines have obtained money by fraud.
  • To individuals or organizations that receive compensation from someone described above for participating in the fraudulent activity.
  • To individuals or organizations that receive compensation from those described above for participating in the fraudulent activity.
• Restitution or penalties: The tax applies regardless of any restitution or penalty already imposed or paid.

Administration and Enforcement

• The commissioner must investigate suspected fraud in coordination with federal, state, or local law enforcement or other applicable agencies.
• The commissioner must establish a payment schedule and enforcement methods for the tax.
• Appeals: Provisions from another statute (section 270C.35) apply to appeals of orders assessing the tax.

Revenue Use and Funds

• Deposit: Money collected from the tax goes to the tax relief account.
• Use of funds: Money in the tax relief account can be used only for income tax relief, property tax relief, or both, as determined by law.
• Fund location: The tax relief account is established in the special revenue fund.

Significance / Changes to Existing Law

• This is a new tax enacted under Minnesota Statutes Chapter 295 (new section 295.90: Tax on Amounts Obtained Through Fraud).
• It supplements existing fraud penalties by imposing an additional financial consequence and directs proceeds to tax relief programs.

Relevant Terms - fraud - 100 percent tax - amount obtained by fraud - convicted of fraud - commissioner of revenue - compensation from a fraud-related participant - tax relief account - special revenue fund - income tax relief - property tax relief - section 270C.35 (appeals)