SF5118

Purpose

To let certain Minnesota local governments temporarily add new local taxes to fund health-related payments. Specifically, eligible jurisdictions could impose small sales, income, and corporate taxes for a limited time, with the money dedicated to support health care payments and uncompensated care.

Who can impose the new taxes (eligibility)

• Eligible jurisdiction: Hennepin County or any city of the first class located in the Minneapolis–St. Paul metropolitan area.
• The changes would add to, notreplace, existing local taxes.

What taxes could be imposed

• Sales and use tax (Subd. 2)
  • Up to 1% in an eligible jurisdiction.
  • In addition to other local taxes.
  • Time limit: up to 36 consecutive months, starting on the first day of a calendar quarter.
  • The authority to impose ends on July 1, 2029.
• Income and corporate franchise taxes (Subd. 3)
  • Up to 1% on:
  • Corporate income for corporations with income in the eligible jurisdiction.
  • Taxable income for residents and nonresidents living or earning in the eligible jurisdiction.
  • These taxes are in addition to other local taxes.
  • Key rules:
  • Administered under Minnesota’s income tax rules (Chapter 290).
  • Collected by the state tax commissioner (the commissioner of revenue).
  • Penalties, interest, and enforcement mirror state income/corporate taxes.
  • First effective taxable year after the jurisdiction adopts the tax.
  • May be imposed for up to three consecutive taxable years.
  • Expiration: for taxable years beginning after December 31, 2029, the authority ends on January 1, 2030.

How the taxes would be administered and collected

• The commissioner of revenue would collect all taxes under these provisions.
• Taxes follow the same collection and enforcement rules as state taxes (Chapter 290 for income taxes; applicable rules for corporate income).

Use of the revenue

• All tax revenues, including interest and penalties, would go to the general fund.
• The money in the general fund would be annually appropriated to the commissioner of health to pay for:
  • A private nonprofit hospital located in Minneapolis that the commissioner of health designates as a level I trauma hospital (per statute 144.605, subdivision 3).
  • Uncompensated care provided by private nonprofit hospitals in eligible jurisdictions.

Notable timeframes and limits

• Sales tax: up to 36 months, expiration July 1, 2029.
• Income and corporate taxes: up to three consecutive taxable years; expiration January 1, 2030 (for years beginning after December 31, 2029).
• Taxes are temporary and specifically targeted to be used for health-related payments in the designated jurisdictions.

Summary of overall intent

• Create a limited, temporary mechanism for eligible jurisdictions to generate local revenue through new sales and income taxes.
• Direct the revenue to health care payments, focusing on a Minneapolis level I trauma hospital and related uncompensated care.
• Keep existing tax systems intact by placing these taxes under state collection and enforcement and by tying their duration to explicit end dates.

Potential impacts to consider

• Local governments within the eligible jurisdictions would have a new, time-limited funding option.
• Increased local revenue could help cover hospital expenses and uncompensated care.
• The temporary nature means the taxes would sunset after the specified periods, unless extended by further legislation.

Relevant Terms eligible jurisdiction; Hennepin County; city of the first class; metropolitan area; sales and use tax; income tax; corporate income tax; resident; nonresident; commissioner of revenue; commissioner of health; general fund; level I trauma hospital; uncompensated care; private nonprofit hospital; Minnesota Statutes; three consecutive taxable years; July 1, 2029; January 1, 2030.