[{"_1":2,"_88":-5,"_89":-5},"loaderData",{"_3":4,"_26":27},"root",{"_5":6,"_17":10,"_18":19,"_20":21,"_22":10,"_23":-5,"_24":-5,"_25":10},"user",{"_7":8,"_9":10,"_11":10,"_12":-5,"_13":-5,"_14":15,"_16":-5},"roles",[],"isAuthenticated",false,"isPremium","planName","subscriptionStatus","featureFlags",{},"insightsBudget","isDevelopmentHost","userPreferences",{},"recaptchaSiteKey","6LcvOJcUAAAAAHsB-gPGfGktcRlKpH7OTIU_dMTD","isImpersonating","impersonation","affiliateStatus","isFreedomPortal","routes/v2/article/layout",{"_28":29,"_30":31},"notFound",true,"relatedArticles",[32,76],{"_33":34,"_35":36,"_37":38,"_39":40,"_41":42,"_43":44,"_45":46,"_47":48,"_49":50,"_51":52,"_53":54,"_55":56,"_57":58,"_59":60,"_61":62,"_63":64,"_65":66,"_67":68,"_69":70,"_71":72,"_73":74,"_75":74},"mediaId",6616132,"mediaKeyId","2853851-5076728eaf6b5fb01f6b462ad63d29a1","parentId",2853851,"title","House Taxes Committee hears Governor’s tax plan, debate centers on sales‑tax expansion and R&D refundability","audioSeconds",6016,"startMs",526000,"endMs",6542000,"viewUrl","/Search/View?dp=1&key=2853851-5076728eaf6b5fb01f6b462ad63d29a1&start=526&end=6542","thumbnailUrl","https://assets.pipeline.soar.com/2853851-5076728eaf6b5fb01f6b462ad63d29a1/thumbnail_526000.jpg","articleUrl","/articles/6616132/Minnesota/House-Taxes-Committee-hears-Governors-tax-plan-debate-centers-on-salestax-expansion-and-RD-refundability","mediaUrl","https://secure.pipeline.soar.com/6616132-fef1d1bb459651eb05488b4d3126d738/orig.mp4?Expires=1773499809&Signature=jCcYhBZtz0qlOURsQV7EvfAuetqtknCH9X5StYmOcHVxoSxee8V9UIc7ndMGs9nQ~F8xEMmp9p7BEyZfVsj0JJxSKVVju9u8aOKONZRPJt3LBnE~drb5jtSZejHkHavb~LF2vssdVVuyAUOLLL7UPF4DWDzybysNHwXwXqlMRnNsf9mYuRGh4pyVOuY8HTZTWt4rBC296Tag0~quw~txJHLhhS0wExwk~3RVKNdHVB2C6f9YAVVm1~gcVl0ma6PJ1E~Ss0bGXQ61VP4akMKTPj2jPeZgu4HO2qT1giT~p8whiqQcaks4aa35ERyh0fAzfLKaTXaKI616MexT7tniLQ__&Key-Pair-Id=KUT5TJCACFTXG","author","Minnesota Legislature","date","2025-04-02T21:56:58.737Z","article","The House Taxes Committee heard Governor Tim Walz’s proposed tax package, House File 2,437, with Paul Marquart, commissioner of the Minnesota Department of Revenue, presenting the measures and explaining revenue estimates and policy goals.

The proposal includes several high‑profile items: a targeted expansion of the state sales tax to selected professional and personal services while reducing the base rate slightly, a 25% refundable portion of the state R&D tax credit, changes to payments in lieu of taxes (PILT), reduced payments for the Sustainable Forest Incentive Act (SFIA), adjustments to aquatic invasive species funding, and a sustainable aviation fuel (SAF) incentive. The bill also would repeal the political contribution refund program and suspend the tax filing modernization account connected to a pilot direct‑file initiative.

\"It really looks to create a more fair and stable tax system while also creating economic development and new jobs,\" said Paul Marquart, Commissioner of the Minnesota Department of Revenue. Marquart said the administration designed the package to shift the tax base incrementally toward a more service‑heavy economy and to use targeted incentives to spur research and development and sustainable aviation fuel production.

Key fiscal points presented by Marquart included an estimated $99 million annual reduction from the proposed 0.075 percentage‑point cut in the statewide sales tax rate and an estimated $215 million in revenue from expanding the sales tax base to selected services in the first year, producing a net gain in that period. The commissioner told the committee the expansion targets services such as accounting, legal, certain financial services, and personal services but deliberately exempts business‑to‑business transactions to avoid tax pyramiding. The department said most expanded categories would take effect for sales after Sept. 30, 2025.

The refundable R&D credit (refundability capped at 25% of excess credit) drew support from business groups. \"Making the R&D tax credit refundable up to 25% ensures that when a company's investment in research and development exceeds its tax liability, the difference is refunded,\" said Gavin Hansen, fiscal and economic policy director for the Minnesota Business Partnership, urging committee support.

By contrast, trade groups and professional organizations strongly opposed the sales‑tax expansion. Kyle Playford of the Financial Planning Association of Minnesota argued the proposal would tax financial planning and other professional services that his organization considers essential and not discretionary. \"Adding a sales tax to these essential services would increase costs for consumers, potentially pricing out those who need financial advice the most,\" Playford said.

Similarly, Gail Mikolic, chief operating officer of Northeast Bank, and Chino Fragnito, government relations director for the Minnesota CPA Society, told the committee that taxing banking fees and accounting services would be complex to administer and could push low‑income customers away from basic financial services. Brian Lake of the Minnesota State Bar Association warned a consumer‑only tax on legal services would particularly harm low‑ and moderate‑income litigants in matters such as eviction, family law and consumer debt defense.

Counties, local governments and conservation groups raised separate concerns. Association of Minnesota Counties representative Matt Hilgert and Minnesota Intercounty Association representative Nathan Jessen said reductions in PITL and other items would shift costs to county property taxpayers. The Nature Conservancy and Minnesota Forest Industries opposed proposed cuts to SFIA payments, arguing that lower payments and allowing covenant withdrawals would undermine forest conservation by private landowners.

Other specifics presented or discussed at the hearing:
- PILT: Commissioner Marquart said the bill would reduce PILT payments from about $48 million a year to roughly $31 million, restoring roughly 2015 levels on a proposed 34% cut in the amendment he referenced.
- Sustainable Aviation Fuel: The bill includes language matching House File 1669 to incentivize production and to favor lower carbon‑intensity fuels.
- R&D credit: The state R&D tax credit would be refundable up to 25% of unused credit; Marquart said the credit is roughly a $20 million per year tax cut and would benefit about 500 corporations and 100 pass‑through entities.
- Sales tax effective date: The sales‑tax expansion items would apply to purchases made after Sept. 30, 2025, under the bill’s current language.
- Fiscal estimates: Marquart cited a first full‑year estimate (fiscal 2027) of a $99 million cost from the rate cut and $215 million revenue from service expansion, yielding a net projected revenue change in the first year; department research was used to estimate household and sectoral impacts and the commissioner noted the department’s modeling suggested many households would see a net tax cut under the package depending on service use.

Public testimony was extensive and mixed: business groups and the Minnesota Business Partnership supported R&D refundability and SAF incentives; banks, financial planners, CPAs, bar association and county groups opposed the sales‑tax expansion and expressed implementation and equity concerns; tenant advocates and Homeline supported renter certificate reforms in the bill.

The committee adopted an amendment offered in committee and heard extensive testimony but did not take a final recorded roll‑call on the full bill during the hearing. The author moved to lay the bill over for possible inclusion in the omnibus tax bill.

Why it matters: The proposal would reshape state tax policy by broadening the sales‑tax base while trimming the rate slightly, potentially changing tax burdens across households and businesses and affecting county budgets and conservation programs across Minnesota.

Speakers (selection): Paul Marquart (Commissioner, Minnesota Department of Revenue); Gavin Hansen (Fiscal & Economic Policy Director, Minnesota Business Partnership); Kyle Playford (Financial Planning Association of Minnesota); Gail Mikolic (COO, Northeast Bank); Matt Hilgert (Association of Minnesota Counties); Nathan Jessen (Minnesota Intercounty Association); Brian Lake (Minnesota State Bar Association); Chino Fragnito (Minnesota CPA Society); Michael Dahl (Homeline); Rick Horton (Minnesota Forest Industries); Nan Madden (organization: not specified in transcript); John Call (Claw Tax Group, virtual); Brian Cook (Minnesota Chamber of Commerce).

Authorities referenced in testimony or presentation included House File 2,437 (Governor’s tax bill), Sustainable Forest Incentive Act (SFIA), payments in lieu of taxes (PILT), the state R&D tax credit and statutory sales‑tax definitions as used by the Department of Revenue.

Meeting context: high engagement with a long list of public testifiers; departmental presentation followed by two‑minute testimony slots for many stakeholders. The committee adopted an in‑committee amendment and proceeded to gather public comment for the record.

Searchable tags: [\"HF2437\",\"sales tax expansion\",\"R&D credit\",\"PILT\",\"SFIA\",\"sustainable aviation fuel\",\"Department of Revenue\",\"Minnesota\"]

Provenance:{\"transcript_segments\":[{\"block_id\":\"block_34\",\"local_start\":0,\"local_end\":170,\"evidence_excerpt\":\"Okay, so I will move house file, and this is a Davis Gomez bill, I'll move house file 2,437. I will now move the 8 20 five-four 2 amendment to get the bill in the shape that I would like it.\",\"reason_code\":\"topicintro\"},{\"block_id\":\"block_97\",\"local_start\":0,\"local_end\":160,\"evidence_excerpt\":\"I'll renew my motion that house file 24 37 as amended be, including the omnibus tax bill. Anything else for the good of the order? Go to government all the time. We're adjourned.\",\"reason_code\":\"topicfinish\"}]}
","mediaType","Video","parentTitle","House Taxes Committee 4/2/25","oneSentenceSummary","Commissioner Paul Marquart presented the governor’s tax package, House File 2,437, to the House Taxes Committee, describing a targeted sales‑tax expansion, a partially refundable R&D credit, cuts to certain conservation and PILT payments, and other changes.","taxTitle","2025 Legislature MN, Minnesota","taxId",77817,"location","Minnesota","headline","","shortSummary",{"_33":77,"_35":36,"_37":38,"_39":78,"_41":79,"_43":80,"_45":81,"_47":82,"_49":83,"_51":84,"_53":85,"_55":56,"_57":58,"_59":86,"_61":62,"_63":64,"_65":87,"_67":68,"_69":70,"_71":72,"_73":74,"_75":74},6616137,"Committee lays over bill to speed refunds for cigar wholesalers",505,18000,523000,"/Search/View?dp=1&key=2853851-5076728eaf6b5fb01f6b462ad63d29a1&start=18&end=523","https://assets.pipeline.soar.com/2853851-5076728eaf6b5fb01f6b462ad63d29a1/thumbnail_18000.jpg","/articles/6616137/Minnesota/Committee-lays-over-bill-to-speed-refunds-for-cigar-wholesalers","https://secure.pipeline.soar.com/6616137-e77f9c14d90392abc86b32b5f48bf0cb/orig.mp4?Expires=1773499809&Signature=hGfON0iuWNthZp2wQIvNjYWC9XwYnS5oyR5L34kVIhWwyk-ak6JOcCcf45gE3R4-zdmJN2DcjT8l~Ovf2kHPYCVCXnxHTszJOoID6wYF8CrxrNoCwxnDRS3pATXLkdXTgckUk2bJBU9wohmQyNCaawFsvfw8adojp9ZrawnkowUAITc41La0KRv7CRhIBYYITGvDHgCUb~7ZD79iXO7JpGwOU7LbVDlf9jcGQsWkgW8n1gVFV13inarAZKyTFNSOXvzQxdlv3dgSeVrL6n7revdkDVlywmH4Qzqpu3THl0mJcbaxwAZzxmbc36-TURJlDBSQS0iG14abMq5Uv4q49w__&Key-Pair-Id=KUT5TJCACFTXG","The House Taxes Committee on Monday moved House File 926, a bill intended to change when Minnesota’s tobacco tax applies to cigars brought into the state by wholesalers and to speed refunds when inventory is shipped out of state.

Supporters and the Department of Revenue told the committee the measure would ease cash‑flow burdens on small fulfillment businesses while preserving the state’s right to collect tax on products ultimately sold in Minnesota.

House File 926, as amended by the DE2 amendment, would allow wholesalers to document cigars stored in Minnesota that are destined for out‑of‑state sale and to hold those items exempt from upfront Minnesota tobacco tax until sale into Minnesota. The author said the change is modeled on an Illinois law and was developed with the Department of Revenue.

\"We store, ship, and fulfill orders for boutique cigar brands across the country,\" said Angelo Fraboni, identified as one of the owners of Founders Cigar Company. \"We are required to pay Minnesota's tobacco tax upfront on every cigar that enters our warehouse, regardless of whether it's ever sold in the state.\" Fraboni told the committee his firm made 1,528 total shipments and that 207 of those stayed in Minnesota, and described a months‑long refund process for taxes that had already been paid.

Joanna Baerz, legislative director for the Minnesota Department of Revenue, told the committee the agency had worked with the bill’s author and had no formal policy position, but that the language was in a form the department could administer. \"We think it's in a good shape of where we can administer, address a lot of our concerns with the original language,\" Baerz said.

Committee members voted to adopt the DE2 amendment. After public testimony and department comment, the committee laid House File 926, as amended, over for possible inclusion in the omnibus tax bill.

Why it matters: The bill does not change Minnesota’s cigar tax rate or the state’s authority to tax products sold in Minnesota. Instead, it changes the timing of tax collection for inventory that wholesalers can document as destined for sale outside Minnesota; proponents said that will reduce administrative burdens for small businesses and reduce refund backlogs for the Department of Revenue.

Other details from the hearing:
- The author said the bill was intended to address a specific ‘‘hiccup’’ in how wholesalers are taxed when they import cigars into Minnesota and store them for interstate fulfillment.
- Fraboni said he had cigars received in December 2022 that remained in storage and that a refund request submitted in June of the prior year had not been returned until March, creating cash‑flow problems for small businesses.
- The Department of Revenue confirmed it collaborated on the draft language and could administer the change as written.

Votes and formal actions:
- DE2 amendment to House File 926: amendment adopted (voice vote; committee recorded \"Aye\" and \"Motion prevails\").
- Motion to lay over House File 926, as amended, for possible inclusion in the omnibus tax bill: motion renewed and laid over (no roll‑call tally recorded in transcript).

Speakers (as identified in the record):
- Chairman Nash, Chair/author of House File 926 (legislator)
- Angelo Fraboni, owner, Founders Cigar Company (business)
- Joanna Baerz, Legislative Director, Minnesota Department of Revenue (government)
- Representative Smith (legislator, moved April 1 minutes)

Authorities referenced:
- Minnesota tobacco tax law (inventory taxation of wholesaler stock; not otherwise specified) — referenced_by:[\"hf926-cigar-wholesaler-tax-refund\"]
- Illinois law (model for exemption timing; not specified) — referenced_by:[\"hf926-cigar-wholesaler-tax-refund\"]

Clarifying details:
- Shipments cited by testifier: 1,528 total shipments since launch; 207 remained in Minnesota (figures given by Angelo Fraboni).
- Example refund delay: refund request submitted in June (prior year) and paid in March (testifier’s description of timeline).
- The bill does not change tax rates or the state's authority to tax sales that occur within Minnesota; it realigns timing of taxation for documented out‑of‑state sales.

Proper names: [{\"name\":\"Founders Cigar Company\",\"type\":\"business\"},{\"name\":\"Minnesota Department of Revenue\",\"type\":\"agency\"}]

Community relevance: {\"geographies\":[\"Minnesota\"],\"funding_sources\":[],\"impact_groups\":[\"small fulfillment businesses\",\"wholesalers\"]}

Discussion vs. decision: {\"discussion_points\":[\"cash‑flow burdens for small wholesalers\",\"lengthy refund processing by Department of Revenue\",\"modeled on Illinois law\"],\"directions\":[],\"decisions\":[\"DE2 amendment adopted\",\"House File 926 laid over for possible inclusion in omnibus tax bill\"]}

Meeting context: {\"engagement_level\":{\"speakers_count\":4,\"duration_minutes\":50,\"items_count\":1},\"implementation_risk\":\"low\",\"history\":[{\"date\":\"not specified\",\"note\":\"Reported refund delays in prior year; bill modeled on Illinois law\"}]}

Searchable_tags:[\"HF926\",\"cigar wholesalers\",\"tobacco tax\",\"refunds\",\"Minnesota Department of Revenue\"]

Provenance:{\"transcript_segments\":[{\"block_id\":\"block_2\",\"local_start\":0,\"local_end\":127,\"evidence_excerpt\":\"I will move House File 9 26, and the motion will be to later for possible including the anonymous tax bill.\",\"reason_code\":\"topicintro\"},{\"block_id\":\"block_32\",\"local_start\":0,\"local_end\":181,\"evidence_excerpt\":\"No, thank you, Chair Nash. We appreciate your time. And so I'll renew my motion that House File 9 26 as amended be laid over for possible inclusion in the marvelous, omnibus tax bill that is about to come before us.\",\"reason_code\":\"topicfinish\"}]}
","The House Taxes Committee moved House File 926, a bill to exempt documented out‑of‑state cigar sales from upfront Minnesota tobacco tax collection and to streamline refunds; the measure was amended and laid over for possible inclusion in the omnibus tax bill after testimony from wholesalers and Department of Revenue staff.","actionData","errors"]

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House Taxes Committee hears Governor’s tax plan, debate centers on sales‑tax expansion and R&D refundability

Committee lays over bill to speed refunds for cigar wholesalers