Minnesota and Wisconsin reach agreement on tax reciprocity payments

In a significant move aimed at streamlining tax reciprocity between Minnesota and Wisconsin, the Maine State Legislature introduced House Bill 3115 on April 3, 2025. This bill seeks to clarify and enhance the financial agreements governing tax payments between the two states, particularly for residents who work across state lines.

At the heart of House Bill 3115 is a provision that addresses the complexities of tax liabilities for individuals domiciled in Wisconsin but working in Minnesota, and vice versa. The bill proposes a systematic approach to calculating and compensating for net revenue losses incurred by either state due to the existing tax reciprocity agreements. Specifically, it outlines a framework for determining when one state’s tax revenue loss exceeds the other’s, triggering a compensation mechanism to balance the scales.

Key provisions of the bill include the establishment of quarterly payment schedules, with payments due on February 15, May 15, August 15, and November 15. This structured timeline aims to ensure timely financial adjustments between the states. Additionally, the bill empowers the Minnesota commissioner of revenue to negotiate specific terms with Wisconsin, including payment conditions and interest rates for any overdue amounts.

However, the bill has not been without its controversies. Some lawmakers have raised concerns about the potential financial implications for Minnesota, particularly regarding the estimated revenue losses that could arise from the proposed changes. Critics argue that the bill may disproportionately benefit Wisconsin residents at the expense of Minnesota’s tax base. Proponents, on the other hand, emphasize the need for a fair and equitable system that recognizes the realities of cross-border employment.

The implications of House Bill 3115 extend beyond mere tax calculations. Economically, it could foster a more collaborative relationship between Minnesota and Wisconsin, encouraging workforce mobility and potentially boosting local economies. Socially, it addresses the concerns of residents who navigate the complexities of dual-state taxation, providing clarity and reducing the administrative burden on taxpayers.

As the bill moves through the legislative process, experts suggest that its passage could set a precedent for other states grappling with similar tax reciprocity issues. The outcome remains uncertain, but the discussions surrounding House Bill 3115 highlight the ongoing challenges and opportunities in managing cross-state taxation in an increasingly interconnected economy.