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SF2867 (Legislative Session 94 (2025-2026))

Fifth tier of the individual income tax establishment at a rate sufficient to offset lost federal Medicaid funds

Related bill: HF2591

AI Generated Summary

Purpose of the Bill

The purpose of this bill is to modify Minnesota’s individual income tax structure to introduce a new, higher tax bracket (referred to as a "fifth tier"). This change aims to generate revenue to compensate for potential reductions in federal Medicaid funding.

Main Provisions

  • Introduction of a Fifth Tax Bracket: The bill proposes the establishment of a fifth tier in the state income tax system. This new tier will apply a tax rate sufficient to recover funds lost from any changes to federal Medicaid policy affecting the state’s finances.
  • Adjustment of Existing Tax Brackets: For different categories of taxpayers—such as married individuals filing jointly, unmarried individuals, and heads of household—the existing tax brackets are specified, but it suggests the addition of a new top rate beyond current levels for those with higher incomes.

Significant Changes to Existing Law

  • Fifth Tier Rate Calculation: The Minnesota Department of Revenue is tasked with determining the specific tax rate for the new fifth tier. This rate should raise enough revenue during fiscal years 2026 and 2027 to offset the financial impact of federal Medicaid changes, as estimated by state officials.
  • Timeline Implementation: The fifth tier tax rate is to be calculated for taxable years beginning after December 31, 2024, and is to remain in effect beyond December 31, 2026.

Relevant Terms

fifth tier, income tax rate, Medicaid funds, federal policy changes, taxable income brackets, Department of Revenue, revenue generation

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
March 19, 2025SenateFloorActionIntroduction and first reading
March 19, 2025SenateFloorActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "A new tier of individual income tax to offset federal Medicaid fund losses."
      ],
      "removed": [],
      "summary": "This bill modifies tax rates and computations for individual income tax under section 290.06.",
      "modified": [
        "Adjustments to the income brackets and tax percentages for different filing statuses."
      ]
    },
    "citation": "290.06",
    "subdivision": "subdivisions 2c, 2d"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This section was referenced concerning the allocation and assignability provisions for computing income tax.",
      "modified": []
    },
    "citation": "290.081",
    "subdivision": "clause a"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This section relates to taxation for non-residents and electing qualifying entities.",
      "modified": []
    },
    "citation": "289A.08",
    "subdivision": "subdivision 7a"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This subsection is referenced for adjustments required in computing non-resident income tax.",
      "modified": []
    },
    "citation": "290.0131",
    "subdivision": "subdivisions 2, 6, 8 to 10, 16, 17, 19, and 20"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "This paragraph is part of the adjustments for non-resident income tax computations.",
      "modified": []
    },
    "citation": "290.0137",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Subtractions mentioned for computing non-resident income tax.",
      "modified": []
    },
    "citation": "290.0132",
    "subdivision": "subdivisions 2, 9, 10, 14, 15, 17, 18, 27, 31, and 32"
  }
]

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