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LBO reviews Tax Expenditure Review Commission 2025 annual report, flags follow-ups

Taxes Committee · February 19, 2026

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Summary

The Legislative Budget Office briefed the Taxes Committee on the Tax Expenditure Review Commission's 2025 annual report, summarizing five evaluations covering 15 tax expenditures and detailing the commission's new procedures and planned 2026 recommendations. Committee members pressed staff for more distributional data and follow-up analyses.

The Legislative Budget Office presented the Tax Expenditure Review Commission's 2025 annual report to the Taxes Committee, describing the commission's work in establishing objectives and conducting evaluations of state tax expenditures.

Carlos Whitica of the LBO told the committee the commission was created in 2021 and met three times in 2025 to review five evaluations covering 15 tax expenditures. "These policies are sometimes described as spending through the tax code," Whitica said, citing the statutory definition the commission works under. The LBO noted the state's 2024 tax-expenditure budget lists 327 tax expenditures in Minnesota.

The report includes standalone and bundled reviews: the marriage credit; bundled sales-tax exemptions for solar and wind systems; bundled credits for small alcohol producers; a bundle of lawful-gambling provisions; and exemptions for residential heating fuel and water/sewer services. The LBO said it provides research and analysis for evaluations and that the Department of Revenue supplied data used in several reviews. The annual report also documents procedural rules the commission adopted to form recommendations to the legislature.

Committee members used the presentation to press staff for clarifying data. Senator Nelson asked whether the largest benefits of heating-fuels and utilities exemptions were going to higher-income households and requested median-income and decile breakdowns; LBO staff said they could provide additional median-income and utility-usage data as a follow-up. Members also asked about modeling tools; the LBO said it is adopting commonly used input-output tools such as IMPLAN and REMI to measure economic spillovers.

The commission has already voted to recommend modifications to some items; LBO staff said details and formal recommendations will appear in the 2026 annual report. The committee scheduled additional hearings next week to continue related business before adjourning.