SF5193

Purpose

Creates a new tax on amounts obtained through fraud to fund income or property tax relief. The goal is to deter fraud against state programs and use recovered funds to provide tax relief.

Main provisions

• Fraud defined: the intentional use of deceit or dishonest means to obtain state money from a state program or appropriation, excluding refunds for overpayment of taxes. A conviction is not required for the tax to apply.
• Tax rate: a tax equal to 100 percent of the amount obtained by fraud. This applies to individuals or organizations:
  • convicted by a state or federal court of fraud,
  • determined by the commissioner of revenue to have obtained money by fraud,
  • that receive compensation from someone described above in exchange for participating in fraudulent activity,
  • or receive compensation from someone described above for participating in fraud-related activity.
• Non-offsetting: the tax applies regardless of any restitution or penalties already imposed or paid.
• Investigator role: the commissioner of revenue must investigate suspected fraud in collaboration with federal, state, or local law enforcement or other applicable agencies.
• Enforcement and appeals: the commissioner sets the payment schedule and enforcement methods. Appeals follow the existing procedures in section 270C.35.
• Revenue use: money collected must be deposited into a tax relief account and used only for income and/or property tax relief. The account is established in the state’s special revenue fund.

How it is implemented

• The commissioner oversees enforcement and determines who owes the tax, with input from law enforcement.
• Payments are collected under a schedule determined by the commissioner.
• The tax is collected even if restitution or penalties are already paid or ordered.

Significance and potential impact

• Creates a stringent 100% tax on fraud proceeds, expanding penalties beyond existing restitution or penalties.
• Shifts recovered fraud funds into a dedicated tax relief account, potentially increasing resources for income/property tax relief.
• Introduces a formal enforcement and appeals pathway through the existing tax and revenue framework.

Significant changes to current law

• Establishes a new 100% fraud-based tax under Minnesota Statutes chapter 295.
• Reallocates money from fraud recovery to a dedicated tax relief account in the special revenue fund.
• Expands the role of the commissioner of revenue in investigating fraud tied to state funds and enforcing payment terms.

Relevant Terms fraud; 100 percent tax; tax relief account; Minnesota Statutes chapter 295; commissioner of revenue; state program; appropriation; conviction; compensation; participate in fraud; restitution; penalties; investigation; enforcement; appeals; 270C.35; special revenue fund; income tax relief; property tax relief