Individual income tax rates modified, county program aid increased to offset county costs associated with federal Supplemental Nutrition Assistance Program changes, school district revenue adjusted, commissioner required to estimate costs, and money appropriated.

A bill for an act

relating to financing state and local government; modifying individual income tax

rates; increasing county program aid to offset county costs associated with federal

Supplemental Nutrition Assistance Program changes; adjusting school district

revenue for changes in the Supplemental Nutrition Assistance Program; requiring

the commissioner of management and budget to estimate certain costs; appropriating

money; amending Minnesota Statutes 2024, sections 290.06, subdivision 2d;

477A.03, subdivision 2b; Minnesota Statutes 2025 Supplement, sections 126C.10,

subdivision 3; 290.06, subdivision 2c.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2025 Supplement, section 126C.10, subdivision 3, is amended

to read:

Subd. 3.

Compensatory education revenue.

(a) A district's compensatory revenue

equals the sum of its compensatory revenue for each building in the district and the amounts

designated under Laws 2015, First Special Session chapter 3, article 2, section 70, subdivision

8, for fiscal year 2017. Revenue shall be paid to the district and must be allocated according

to section
126C.15, subdivision 2
.

(b) For fiscal years 2024, 2025, and 2026, the compensatory education revenue for each

building in the district equals the formula allowance minus $839 times the compensation

revenue pupil units computed according to section
126C.05, subdivision 3
.

(c) For fiscal year 2027 and later, the compensatory education revenue for each building

in the district equals
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its
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the product of the: (1)
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compensatory pupils
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multiplied by the
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; (2)
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building compensatory allowance
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; and (3) statewide compensatory Supplemental Nutrition

Assistance Program adjustment factor
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.

(d) When the district contracting with an alternative program under section
124D.69

changes prior to the start of a school year, the compensatory revenue generated by pupils

attending the program shall be paid to the district contracting with the alternative program

for the current school year, and shall not be paid to the district contracting with the alternative

program for the prior school year.

(e) When the fiscal agent district for an area learning center changes prior to the start of

a school year, the compensatory revenue shall be paid to the fiscal agent district for the

current school year, and shall not be paid to the fiscal agent district for the prior school year.

(f) Notwithstanding paragraph (c), for fiscal year 2026, if the sum of the amounts

calculated under paragraph (c) is less than $838,947,000, the commissioner must

proportionately increase the revenue to each building until the total statewide revenue

calculated for each building equals $838,947,000.

(g) Notwithstanding paragraph (c), for fiscal year 2027 and later, if the sum of the

amounts calculated under paragraph (c) is less than $857,152,000, the commissioner must

proportionately increase the revenue to each building until the total statewide revenue

calculated for each building equals $857,152,000.

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(h) For fiscal year 2027 and later, the Department of Education must calculate the

statewide compensatory Supplemental Nutrition Assistance Program adjustment factor. The

adjustment factor equals:

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(1) one; plus

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(2) the ratio of the compensatory loss adjustment to the total number of pupils identified

through direct certification for that year.

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The compensatory loss adjustment equals the greater of zero or the difference between the

number of pupils identified through direct certification on the basis of participation in the

Supplemental Nutrition Assistance Program during the fall of 2024 and the number of pupils

identified through direct certification on the basis of participation in the Supplemental

Nutrition Assistance Program during the fall of the previous fiscal year.

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EFFECTIVE DATE.

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This section is effective for revenue for fiscal year 2027 and later.

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Sec. 2.

Minnesota Statutes 2025 Supplement, section 290.06, subdivision 2c, is amended

to read:

Subd. 2c.

Schedules of rates for individuals, estates, and trusts.

(a) The income taxes

imposed by this chapter upon married individuals filing joint returns and surviving spouses

as defined in section 2(a) of the Internal Revenue Code must be computed by applying to

their taxable net income the following schedule of rates:

(1) On the first
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$38,770
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$48,700
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, 5.35 percent;

(2) On all over
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$38,770
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$48,700
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, but not over
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$154,020
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$193,480
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, 6.8 percent;

(3) On all over
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$154,020
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$193,480
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, but not over
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$269,010
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$337,930
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, 7.85 percent;

(4) On all over
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$269,010
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$337,930, but not over $1,667,000
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, 9.85 percent
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.
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; and
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(5) On all over $1,667,000, the percentage determined under paragraph (g).

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Married individuals filing separate returns, estates, and trusts must compute their income

tax by applying the above rates to their taxable income, except that the income brackets

will be one-half of the above amounts after the adjustment required in subdivision 2d.

(b) The income taxes imposed by this chapter upon unmarried individuals must be

computed by applying to taxable net income the following schedule of rates:

(1) On the first
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$26,520
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$33,310
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, 5.35 percent;

(2) On all over
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$26,520
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$33,310
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, but not over
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$87,110
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$109,430
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, 6.8 percent;

(3) On all over
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$87,110
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$109,430
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, but not over
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$161,720
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$203,150
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, 7.85 percent;

(4) On all over
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$161,720
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$203,150, but not over $1,000,000
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, 9.85 percent
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.
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; and
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(5) On all over $1,000,000, the percentage determined under paragraph (g).

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(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as

a head of household as defined in section 2(b) of the Internal Revenue Code must be

computed by applying to taxable net income the following schedule of rates:

(1) On the first
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$32,650
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$41,010
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, 5.35 percent;

(2) On all over
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$32,650
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$41,010
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, but not over
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$131,190
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$164,800
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, 6.8 percent;

(3) On all over
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$131,190
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$164,800
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, but not over
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$214,980
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$270,060
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, 7.85 percent;

(4) On all over
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$214,980
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$270,060, but not over $1,334,000
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, 9.85 percent
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.
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; and
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(5) On all over $1,334,000, the percentage determined under paragraph (g).

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(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax

of any individual taxpayer whose taxable net income for the taxable year is less than an

amount determined by the commissioner must be computed in accordance with tables

prepared and issued by the commissioner of revenue based on income brackets of not more

than $100. The amount of tax for each bracket shall be computed at the rates set forth in

this subdivision, provided that the commissioner may disregard a fractional part of a dollar

unless it amounts to 50 cents or more, in which case it may be increased to $1.

(e) An individual who is not a Minnesota resident for the entire year must compute the

individual's Minnesota income tax as provided in this subdivision. After the application of

the nonrefundable credits provided in this chapter, the tax liability must then be multiplied

by a fraction in which:

(1) the numerator is the individual's Minnesota source federal adjusted gross income as

defined in section 62 of the Internal Revenue Code and increased by:

(i) the additions required under sections
290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,

and 20
, and
290.0137
, paragraph (a); and reduced by

(ii) the Minnesota assignable portion of the subtraction for United States government

interest under section
290.0132, subdivision 2
, the subtractions under sections
290.0132,

subdivisions 9, 14, 15, 18, 27, 31, and 32
, and
290.0137
, paragraph (c), after applying the

allocation and assignability provisions of section
290.081
, clause (a), or
290.17
; and

(2) the denominator is the individual's federal adjusted gross income as defined in section

62 of the Internal Revenue Code, increased by:

(i) the additions required under sections
290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,

and 20
, and
290.0137
, paragraph (a); and reduced by

(ii) the subtractions under sections
290.0132, subdivisions 2, 9, 14, 15, 18, 27, 31, and

32
, and
290.0137
, paragraph (c).

(f) If an individual who is not a Minnesota resident for the entire year is a qualifying

owner of a qualifying entity that elects to pay tax as provided in section
289A.08, subdivision

7a
, paragraph (b), the individual must compute the individual's Minnesota income tax as

provided in paragraph (e), and also must include, to the extent attributed to the electing

qualifying entity:

(1) in paragraph (e), clause (1), item (i), and paragraph (e), clause (2), item (i), the

addition under section
290.0131, subdivision 5
; and

(2) in paragraph (e), clause (1), item (ii), and paragraph (e), clause (2), item (ii), the

subtraction under section
290.0132, subdivision 3
.

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(g) For taxable years beginning after December 31, 2025, and before January 1, 2028,

the commissioner of revenue must calculate the tax rate that applies under paragraphs (a),

clause (5); (b), clause (5); and (c), clause (5). The commissioner must set the rate at the

level the commissioner estimates would be necessary to raise an amount of revenue in fiscal

years 2027 and 2028 equal to the cost of the changes described in section 5, as certified by

the commissioner of management and budget. The rate established by the commissioner

for taxable years beginning after December 31, 2025, and before January 1, 2028, remains

in effect for taxable years beginning after December 31, 2027.

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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Sec. 3.

Minnesota Statutes 2024, section 290.06, subdivision 2d, is amended to read:

Subd. 2d.

Inflation adjustment of brackets.

The commissioner shall annually adjust

the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed

in subdivision 2c
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, except the fifth tier under paragraphs (a), clause (5); (b), clause (5); and

(c), clause (5),
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as provided in section
270C.22
. The statutory year is taxable year
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2019
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2026
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.

The rate applicable to any rate bracket must not be changed. The dollar amounts setting

forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate brackets

as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in $5, it

must be rounded up to the nearest $10 amount. The commissioner shall determine the rate

bracket for married filing separate returns after this adjustment is done. The rate bracket

for married filing separate must be one-half of the rate bracket for married filing joint.

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EFFECTIVE DATE.

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This section is effective for taxable years beginning after December

31, 2025.

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Sec. 4.

Minnesota Statutes 2024, section 477A.03, subdivision 2b, is amended to read:

Subd. 2b.

Counties.

(a)
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For aids payable in 2021 through 2023, the total aid payable

under section
477A.0124, subdivision 3
, is $118,795,000, of which $3,000,000 shall be

allocated as required under Laws 2014, chapter 150, article 4, section 6. For aids payable

in 2024, the total aid payable under section
477A.0124, subdivision 3
, is $154,197,053, of

which $3,000,000 shall be allocated as required under Laws 2014, chapter 150, article 4,

section 6.
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For aids payable in 2025 and thereafter, the total aid payable under section

477A.0124
, subdivision 3, is $151,197,053. On or before the first installment date provided

in section
477A.015
, paragraph (a), $500,000 of this appropriation shall be transferred each

year by the commissioner of revenue to the Board of Public Defense for the payment of

services under section
611.27
. Any transferred amounts not expended or encumbered in a

fiscal year shall be certified by the Board of Public Defense to the commissioner of revenue

on or before October 1 and shall be included in the next certification of county need aid.

(b)
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For aids payable in 2021 through 2023, the total aid under section
477A.0124,

subdivision 4
, is $145,873,444.
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For aids payable in 2024 and thereafter, the total aid under

section
477A.0124, subdivision 4
, is $190,471,391. The commissioner of revenue shall

transfer to the Legislative Budget Office $207,000 annually for the cost of preparation of

local impact notes as required by section
3.987
, and other local government activities. The

commissioner of revenue shall transfer to the commissioner of education $7,000 annually

for the cost of preparation of local impact notes for school districts as required by section

3.987
. The commissioner of revenue shall deduct the amounts transferred under this

paragraph from the appropriation under this paragraph. The amounts transferred are

appropriated to the Legislative Coordinating Commission and the commissioner of education

respectively.

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(c) No later than June 30, 2026, the commissioner of management and budget must

certify to the commissioner of revenue an estimate of the cost to Minnesota counties of

changes to Supplemental Nutrition Assistance Program work requirements under Public

Law 119-21. This cost estimate must include county costs for upgrades to the MAXIS

system. For aids payable in 2026 and later, the amount of aid payable under this subdivision

is increased by the amount certified under this paragraph. The increase under this section

must be allocated proportionally between county need aid under paragraph (a) and county

tax-base equalization aid under paragraph (b) based on each aid's share of total county

program aid for aids payable in 2026.

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EFFECTIVE DATE.

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This section is effective for aids payable in 2026 and later.

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Sec. 5.
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COMMISSIONER OF MANAGEMENT AND BUDGET TO ESTIMATE

FEDERAL FUNDING LOSS.
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(a) No later than June 30, 2026, the commissioner of management and budget must

calculate and certify to the commissioner of revenue an estimate of the total cost in fiscal

years 2027 and 2028 of:

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(1) the statewide compensatory Supplemental Nutrition Assistance Program adjustment

factor under Minnesota Statutes, section 126C.10, subdivision 3;

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(2) the amount of the aid increase under Minnesota Statutes, section 477A.03, subdivision

2b, paragraph (c); and

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(3) additional costs to the state related to:

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(i) the elimination of federal funding for SNAP-Education;

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(ii) the reduction of federal funding for Supplemental Nutrition Assistance Program

administrative costs;

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(iii) Supplemental Nutrition Assistance Program state matching funds required based

on the state's payment error rate; and

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(iv) increased school meal costs due to changes to the Supplemental Nutrition Assistance

Program under Public Law 119-21.

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(b) The commissioner of revenue must use the amount certified under this section to

calculate the rate for the fifth tier of the individual income tax, as provided in Minnesota

Statutes, section 290.06, subdivision 2c, paragraph (g).

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Sec. 6.
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APPROPRIATION; GENERAL EDUCATION AID.
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Subdivision 1.

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Department of Education.

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The sums indicated in this section are

appropriated from the general fund to the Department of Education in the fiscal years

designated.

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Subd. 2.

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Additional general education aid.

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For additional general education aid under

Minnesota Statutes, section 126C.13, subdivision 4:

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$

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.......

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.....

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2027

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