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Multistate Tax Alert: Minnesota Governor’s Proposed 2014-15 Budget Would Result in Significant Tax Law Changes

The Governor’s goal is a “modern tax system”


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Overview

Minnesota Governor Mark Dayton recently released his proposed 2014-2015 budget.1 The Governor’s goal is a “modern tax system” that supports “a balanced budget with no one-time fixes, borrowing or gimmicks” and that is “fair for all Minnesotans.”2 If enacted, the Governor’s proposed budget3 would:

  • Reduce the corporate income tax rate, while eliminating a number of subtraction modifications to the tax base.4
  • Create a new 4th tier personal income tax bracket for high income earners.5
  • Change Minnesota residency rules for part-year residents.6
  • Decrease the sales tax rate, while broadening the overall tax base to include services.7

Many of Governor Dayton’s proposals are similar to those that he proposed in 20118 before a stalemate with House Republicans. These proposals may be more significant this year because this is the first legislative session in over 20 years in which Democrats hold both houses of the State Legislature and the Governorship.9

In this Tax Alert, we highlight the more significant proposed tax law changes, including the various effective dates and the related revenue estimates.

Please download the attached Alert to receive a general background on the corporate income tax proposals, personal income tax proposals and sales and use income tax proposals.

To receive these alerts and stay connected, please sign up for our weekly newsletter State Tax Matters.


1 Budget for a Better Minnesota: Governor Mark Dayton’s FY 2014-15 Budget Recommendations, available at: http://www.mmb.state.mn.us/doc/budget/bud-op/op14/gov-presentation.pdf.
2 Id. at 7.
3 2014-2015 Governor’s Budget – Tax Aids & Credits, available at: http://www.mmb.state.mn.us/narratives2013.
4 Id. at 6.
5 Id. at 4.
6 Id. at 8.
7 Id at 4-5.
8 Minnesota Biennial Budget, FY 2012-2013, State Taxes and Local Aids and Credits, February 15, 2011, available at: http://www.mmb.state.mn.us/gov-bill-11.
9 Please note that the Governor’s proposals are not currently included in a bill to be presented to the legislature. Any bill introduced and ultimately signed into law may be materially different from the Governor's initial proposals.

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