Minnesota Legislative Update: ‘Stay-at-Home’ Order Extended, Senate Passes Tax Plan

Faegre Drinker Biddle & Reath LLP

With two weeks remaining in the legislative session, legislators are processing bills virtually because of COVID-19, which has drastically narrowed legislative priorities in the House and Senate. Even so, the Senate passed its tax bill that provides a variety of business tax relief measures and tax payment extensions. House Democrats announced a series of economic security measures, including $100 million in housing assistance, increased pay for hourly school workers and expanded rural broadband as key end of session priorities.

On Thursday, Governor Tim Walz (DFL) announced another extension of his “stay-at-home” order, continuing it until May 18. This extension added exemptions for retail businesses. The Minnesota DFL also announced that it will join the Republican Party in holding their state convention online.

Updated Budget Forecast Coming

This week promises significant activity. On Tuesday, Minnesota Management & Budget (MMB) will release an updated budget forecast which is expected to show a budget deficit. MMB’s decision to update the budget forecast in May provides the legislature two weeks to address the expected deficit before it adjourns. It will also allow Governor Walz to access money in the budget reserve account as needed to pay for all enacted expenditures. If a deficit remains after the budget reserve is exhausted, the Governor may reduce or delay enacted appropriations, commonly referred to as “unallotment.”

Both House and Senate leaders have indicated that they will release capital investment or bonding proposals after the updated budget forecast is released. Bonding is traditionally the primary order of business during the biennium’s second year and remains the legislature’s top non-coronavirus priority. Senate Majority Leader Paul Gazelka (R-Nisswa) stated publicly this week he is seeking a $750 million bonding bill. Both Governor Walz and House leadership have indicated they prefer bonding bills closer to $2 billion.

Senate Passes Tax Plan

The Senate released and passed its’ tax proposal this week. SF 3843, authored by Sen. Roger Chamberlain (R- Lino Lakes), contains a number of measures providing tax relief to Minnesota businesses and households including:

  • lowering the class rate on first tier of value for all class 4d properties (qualifying low-income rental properties).
  • extending the payment for the state general levy portion only of property taxes until July 15.
  • suspending the June accelerated sales tax payment.
  • full federal conformity for Section 179 expensing.

The bill also contains language addressing the forgiveness of federal loans under the Coronavirus Aid, Relief and Economic Security (CARES) Act. Typically that portion of a loan that is forgiven is treated as taxable income. The federal government provided an exemption in the CARES Act, excluding debt forgiveness from gross income of the business for federal tax purposes. Senator Chamberlain amended SF3843 in the tax committee to prohibit state taxpayers from claiming both the exclusion from gross income of any forgiven paycheck protection program amounts and deductions ordinarily claimed for employee expenses.

DFL Senators raised concerns about the bill being premature due to the uncertainty of Minnesota’s fiscal future, arguing that the Senate should wait to pass any tax proposal until the updated MMB budget forecast is released next Tuesday. Given the anticipated budget deficit that will be announced then questions were also raised about the proposal’s $330 million price tag. The bill passed 40-27.

The House tax bill is expected to be released next week. House DFL leaders, rejecting the Senate’s approach, have indicated support for more targeted tax relief efforts for sectors most impacted by the coronavirus pandemic. Their bill is expected to reflect these priorities.

Governor Walz Extends Stay at Home Order to May 18

Governor Tim Walz issued an executive order extending Minnesota’s “stay-at-home” order through Monday, May 18. Executive Order 20-48 includes expanded curbside pickup to all retailers and new exemptions for businesses providing household goods rentals, maintenance services, repair services and pet grooming. Prior to reopening, retailers are required to establish and implement a COVID-19 preparedness Plan. Like those required by Executive Order 20-40 plans must address social distancing, worker hygiene, sanitation and other elements. The Minnesota Department of Employment and Economic Development (DEED) and the Minnesota Department of Labor and Industry (DOLI) have created a template that retailers may use in developing preparedness plans.

Additional state guidance on what businesses are allowed to re-open under this executive order can be found here. The Minnesota Retailers Association has also developed resources for retailers with best practices for curbside and delivery, appointment shopping, next steps, and more.

In total, Governor Walz has now issued 49 executive orders in response to COVID-19 pandemic. The full list can be found here.

Important Dates

  • May 15-16: GOP State Convention
  • May 18: Legislature Adjourns
  • May 30-31: DFL State Convention
  • June 2: Candidate Filing Deadline for 2020 Election
  • August 11: Primary Election Day
  • November 3: General Election Day

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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