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HF5005 • 2026
Interstate Fiscal Sovereignty Compact adopted, reports required, and money appropriated.
Interstate Fiscal Sovereignty Compact adopted, reports required, and money appropriated.
Passed Legislature
This bill passed both chambers and reached final enrollment, even if later executive action is not shown here.
Bill History
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2026-04-20
House
Author added Moller
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2026-04-16
House
Introduction and first reading, referred to Taxes
Official Summary Text
Interstate Fiscal Sovereignty Compact adopted, reports required, and money appropriated.
Current Bill Text
Read the full stored bill text
A bill for an act relating to taxation; federal taxes; adopting the Interstate Fiscal Sovereignty Compact; requiring reports; appropriating money; proposing coding for new law as Minnesota Statutes, chapter 289B. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: Section 1. new text begin [289B.01] DEFINITIONS. new text end new text begin Subdivision 1. new text end new text begin Definitions. new text end new text begin For purposes of this chapter, the terms defined in this section have the meanings given. new text end new text begin Subd. 2. new text end new text begin Activation order. new text end new text begin "Activation order" means an order issued under section 289B.10, article X, by the Compact Commission directing all member states to commence escrow operations on a specified date. new text end new text begin Subd. 3. new text end new text begin Commissioner. new text end new text begin "Commissioner" means the commissioner of revenue. new text end new text begin Subd. 4. new text end new text begin Compact. new text end new text begin "Compact" means the Interstate Fiscal Sovereignty Compact established under section 289B.10. new text end new text begin Subd. 5. new text end new text begin Compact Commission. new text end new text begin "Compact Commission" means the governing body of the compact established under section 289B.10. new text end new text begin Subd. 6. new text end new text begin Escrow fund. new text end new text begin "Escrow fund" means the fund established under section 289B.02. new text end new text begin Subd. 7. new text end new text begin Lawfully certified. new text end new text begin "Lawfully certified" means electoral votes certified by the official or body designated under state law to certify presidential electors, in accordance with the procedures established by state law, where the certification has not been invalidated by a final order of a court of competent jurisdiction within that state. new text end new text begin Subd. 8. new text end new text begin Member state. new text end new text begin "Member state" means any state that has enacted legislation substantially similar to this act and has filed notice of membership with the Compact Commission. new text end new text begin Subd. 9. new text end new text begin Triggering event. new text end new text begin "Triggering event" means any event described in section 289B.10, article VIII. new text end Sec. 2. new text begin [289B.02] FEDERAL TAX ESCROW FUND. new text end new text begin (a) The federal tax escrow fund is established in the state treasury. Money deposited in the fund must be held in trust and must not be commingled with other state funds or used for any state purpose. new text end new text begin (b) The commissioner of management and budget must deposit in the fund any interest and earnings on money in the fund. new text end new text begin (c) The commissioner of management and budget must maintain a record of all deposits in the fund and all disbursements from the fund. new text end new text begin EFFECTIVE DATE. new text end new text begin This section is effective upon the effective date of an activation order issued by the Compact Commission. new text end Sec. 3. new text begin [289B.03] EMPLOYERS TO DEPOSIT FEDERAL TAXES WITHHELD. new text end new text begin Subdivision 1. new text end new text begin Deposit of federal taxes withheld. new text end new text begin In lieu of remitting the following taxes to the federal government, an employer must deposit into the federal tax escrow fund in the state treasury: new text end new text begin (1) federal income taxes withheld under United States Code, title 26, section 3402; new text end new text begin (2) the employer and employee share of Federal Insurance Contributions Act taxes withheld under United States Code, title 26, section 3102; new text end new text begin (3) federal unemployment taxes withheld under United States Code, title 26, section 3301; and new text end new text begin (4) any other federal employment taxes required to be withheld or paid by employers under federal law. new text end new text begin Subd. 2. new text end new text begin Process for deposit of taxes. new text end new text begin The commissioner of revenue must establish a process for employer compliance with this section. The process must include registration requirements for employers, deposit schedules consistent with federal withholding requirements, and reporting requirements. new text end new text begin Subd. 3. new text end new text begin No compliance required until compact is active. new text end new text begin An employer is not required to take any action under this section until the effective date of an activation order issued by the Compact Commission. new text end new text begin EFFECTIVE DATE. new text end new text begin This section is effective upon the effective date of an activation order issued by the Compact Commission. new text end Sec. 4. new text begin [289B.04] EMPLOYER INDEMNIFICATION. new text end new text begin Subdivision 1. new text end new text begin Employer indemnification. new text end new text begin (a) An employer who complies in good faith with the requirements of this chapter is indemnified by the state of Minnesota against any federal penalties, interest, or other charges arising from compliance. new text end new text begin (b) The state of Minnesota must provide legal defense for any employer facing federal enforcement action arising from compliance with this chapter. new text end new text begin (c) The legislature must appropriate funds sufficient to satisfy the obligations under paragraphs (a) and (b). The legislature must appropriate an amount sufficient to provide credible assurance to employers that the state has sufficient resources to fulfill its obligations under this section. new text end new text begin (d) No employer is subject to a penalty, sanction, or adverse action under Minnesota law for complying with this chapter. new text end new text begin (e) No employer is subject to a penalty for failure to comply with this chapter if the employer: new text end new text begin (1) demonstrates good faith uncertainty regarding their obligations under this chapter; or new text end new text begin (2) did not comply with this chapter due to circumstances beyond the employer's control. new text end new text begin Subd. 2. new text end new text begin Indemnification fund. new text end new text begin (a) The Minnesota employer indemnification fund is established in the state treasury. new text end new text begin (b) The commissioner of management and budget must deposit into the fund any interest and earnings on money in the fund. new text end new text begin (c) The amount determined in paragraph (e) is appropriated each fiscal year to the fund established under paragraph (a). new text end new text begin (d) Money in the Minnesota employer indemnification fund may be used for: new text end new text begin (1) payment of federal penalties, interest, or other charges assessed against employers for acting in compliance with this chapter; new text end new text begin (2) legal defense costs for employers subject to federal tax enforcement action; new text end new text begin (3) legal defense costs for employers facing criminal prosecution arising from compliance with this chapter; or new text end new text begin (4) administrative costs of the indemnification program under this section. new text end new text begin (e) By January 15 of each year, the commissioner of management and budget must annually report to the house of representatives Ways and Means Committee and the senate Finance Committee: new text end new text begin (1) the current balance of the fund; new text end new text begin (2) estimated liabilities to be paid by the fund; and new text end new text begin (3) the amount of appropriations to the fund needed to meet the requirements in this section. new text end new text begin EFFECTIVE DATE. new text end new text begin (a) Subdivision 1 is effective upon the effective date of an activation order issued by the Compact Commission. new text end new text begin (b) Subdivision 2 is effective the day following final enactment. new text end Sec. 5. new text begin [289B.05] CRIMINAL DEFENSE PROSECUTION. new text end new text begin (a) The state must provide legal defense for any employer, officer, or employee of an employer subject to federal criminal prosecution arising from good faith compliance with this chapter. new text end new text begin (b) If an employer, officer, or employee is convicted of a federal crime for actions taken in compliance with this chapter, the commissioner of revenue may provide financial assistance to the convicted person and their family. Financial assistance under this section must be made using funds appropriated by the legislature for that purpose. new text end new text begin EFFECTIVE DATE. new text end new text begin This section is effective upon the effective date of an activation order issued by the Compact Commission. new text end Sec. 6. new text begin [289B.10] INTERSTATE FISCAL SOVEREIGNTY COMPACT. new text end new text begin ARTICLE I new text end new text begin ESTABLISHMENT AND MEMBERSHIP new text end new text begin (a) There is hereby established the Interstate Fiscal Sovereignty Compact. Minnesota is a member of the compact upon enactment of this act. new text end new text begin (b) Any state that enacts legislation substantially similar to this act may join the compact by filing notice with the Compact Commission. new text end new text begin (c) No provision of this act requiring action by employers takes effect until the activation threshold in article II has been met. new text end new text begin ARTICLE II new text end new text begin ACTIVATION THRESHOLD new text end new text begin (a) The compact is activated and the activation threshold is met when: new text end new text begin (1) at least ten states have enacted substantially similar legislation and joined the compact; and new text end new text begin (2) member states collectively represent at least 30 percent of total federal income tax revenue as measured by the most recent Internal Revenue Service Data Book or equivalent federal publication. new text end new text begin (b) The Compact Commission must certify when the activation threshold has been met and must notify all member states within five business days of certification. new text end new text begin (c) The following provisions do not take effect until the activation threshold is met: new text end new text begin (1) requirements for employers to deposit funds into an escrow account under this act; and new text end new text begin (2) the escrow fund established under section 289B.02. new text end new text begin (d) The provisions of this act other than those in paragraph (c) are effective prior to the activation of the compact under this section. new text end new text begin ARTICLE III new text end new text begin PROHIBITION ON UNILATERAL ACTIVATION new text end new text begin Member states may only activate the compact through the coordinated process established in article X, and Minnesota is not permitted to activate the compact without the action of other member states. new text end new text begin ARTICLE IV new text end new text begin COMPACT COMMISSION new text end new text begin (a) There is hereby established the Interstate Fiscal Sovereignty Compact Commission. new text end new text begin (b) The commission consists of the attorney general of each member state or their designee, the chief fiscal officer of each member state or their designee, and one additional member appointed by the governor of each member state. new text end new text begin (c) The commission must elect from among its members a chair and vice-chair who must serve two-year terms. new text end new text begin (d) The commission must: new text end new text begin (1) certify when the activation threshold has been met; new text end new text begin (2) receive and process proposed triggering event certifications; new text end new text begin (3) issue activation orders when triggering events have been certified; new text end new text begin (4) coordinate legal defense strategies among member states; new text end new text begin (5) administer the joint legal defense fund established under article VI; new text end new text begin (6) issue deactivation orders when release conditions have been met; new text end new text begin (7) develop and maintain model employer compliance systems for adoption by member states; new text end new text begin (8) coordinate criminal defense efforts for employers facing federal prosecution; and new text end new text begin (9) perform other functions as necessary to effectuate the purposes of this act. new text end new text begin (e) The commission must meet at least quarterly, and must meet within 72 hours upon request of any three member states. new text end new text begin (f) Each member state must contribute to the operating expenses of the commission in proportion to its share of the compact's total federal tax revenue representation. new text end new text begin ARTICLE V new text end new text begin WITHDRAWAL new text end new text begin (a) Any member state may withdraw from the compact prior to activation by filing written notice with the Compact Commission. Withdrawal under this article is effective 60 days after filing. new text end new text begin (b) A member state must not withdraw from the compact while an activation order is in effect except by unanimous consent of all other member states. new text end new text begin (c) A member state that purports to withdraw in violation of paragraph (b) is liable for its proportionate share of compact expenses and liabilities incurred during the activation period, and is ineligible to rejoin the compact for ten years. new text end new text begin (d) If a member state withdraws or is expelled while an activation order is in effect, employers in that state are released from escrow requirements, but the withdrawing state is liable for indemnification of employers for any federal penalties arising from their compliance during the activation period. new text end new text begin ARTICLE VI new text end new text begin JOINT LEGAL DEFENSE FUND new text end new text begin (a) The commission must establish an interstate fiscal sovereignty legal defense fund, funded by contributions from member states in proportion to their share of the compact's total federal tax revenue representation. new text end new text begin (b) A member state must not enter into any settlement with the federal government regarding this act or related claims without the consent of member states representing at least 60 percent of the compact's total federal tax revenue representation. new text end new text begin (c) The commission must coordinate legal defense of employers facing federal enforcement actions arising from compliance with this act, including identifying lead counsel, developing common legal strategies, and administering disbursements from the joint defense fund. new text end new text begin ARTICLE VII new text end new text begin COMPACT CLAUSE DEFENSE new text end new text begin (a) The legislature finds that article I, section 10, clause 3 of the Constitution of the United States provides that no state may enter into any "Agreement or Compact with another State" without the consent of Congress. new text end new text begin (b) The legislature further finds that the Supreme Court of the United States has held that this provision applies only to compacts that increase state power at the expense of federal power pursuant to Virginia v. Tennessee , 148 U.S. 503 (1893) and U.S. Steel Corp. v. Multistate Tax Comm'n , 434 U.S. 452 (1978). new text end new text begin (c) It is the position of the legislature that the Interstate Fiscal Sovereignty Compact does not require congressional consent because: new text end new text begin (1) the compact does not increase state power. It coordinates the exercise of powers that each state already possesses individually under the anticommandeering doctrine; new text end new text begin (2) each member state, acting alone, possesses the sovereign authority to decline cooperation with federal programs. The compact merely coordinates the timing of that declination; and new text end new text begin (3) the compact does not purport to bind the federal government, alter federal law, or affect the structure of federal authority. It addresses only what member states will do with their own resources. new text end new text begin (d) If a court of competent jurisdiction determines that congressional consent is required, it is the position of the legislature that the requirement of congressional consent is suspended when the compact is activated in response to federal subversion of the electoral process, because: new text end new text begin (1) the congressional consent requirement assumes a legitimate Congress capable of providing or withholding consent; new text end new text begin (2) a Congress that has refused to count lawfully certified electoral votes, or has counted unlawfully certified electoral votes, has forfeited its claim to legitimacy; and new text end new text begin (3) requiring consent from an illegitimate Congress to resist the illegitimacy of that Congress would render the Constitution a suicide pact. new text end new text begin (e) The attorney general must defend the compact against any legal challenge based on the compact clause and must coordinate defense with other member states. new text end new text begin TRIGGERING EVENTS AND ACTIVATION new text end new text begin ARTICLE VIII new text end new text begin TRIGGERING EVENTS new text end new text begin After the activation threshold has been met, the commission may activate this act by certifying one or more of the following triggering events: new text end new text begin (1) the Congress of the United States has refused to count electoral votes that were lawfully certified by state authorities under the laws of the state from which the votes originated; new text end new text begin (2) the Congress of the United States has counted electoral votes that were not lawfully certified by state authorities under the laws of the state from which the votes purported to originate, or has counted electoral votes that were certified in direct contradiction of a final order of a court of competent jurisdiction within that state; new text end new text begin (3) the executive branch of the United States has refused to recognize the results of a presidential election as lawfully certified by the states, or the incumbent president has refused to vacate office following certification of electoral votes for a different candidate; new text end new text begin (4) federal officers or agencies have interfered with the administration of elections in any state through: new text end new text begin (i) seizure of voting equipment, ballots, or election records without judicial authorization; new text end new text begin (ii) deployment of federal personnel to polling places in a manner that suppresses voter participation; new text end new text begin (iii) threats of prosecution against state election officials for performing their duties under state law; new text end new text begin (iv) actions purporting to invalidate state election laws or procedures without judicial authorization; or new text end new text begin (v) other actions designed to alter the outcome of an election or prevent the lawful certification of results. new text end new text begin ARTICLE IX new text end new text begin CERTIFICATION PROCESS new text end new text begin (a) When the attorney general of a member state determines that a triggering event has occurred, the attorney general must transmit a proposed certification to the Compact Commission and to the attorneys general of all other member states. new text end new text begin (b) A proposed certification must identify the triggering event, provide documentation supporting the determination, and specify the date on which the triggering event occurred. new text end new text begin (c) Within 14 days of receipt of a proposed certification, the attorney general of each member state must notify the Compact Commission whether that state concurs in the certification. new text end new text begin (d) A triggering event is certified when the attorneys general representing member states that collectively account for at least 60 percent of the compact's total federal tax revenue representation have concurred in the certification. new text end new text begin ARTICLE X new text end new text begin ACTIVATION new text end new text begin (a) Upon certification of a triggering event, the Compact Commission must immediately notify all member states and must issue an activation order specifying an activation date that is 30 days after certification. new text end new text begin (b) On the activation date, escrow requirements in all states take effect. Employers in all member states must begin depositing funds into state escrow accounts on the activation date. new text end new text begin (c) The commission must coordinate public communications to ensure consistent messaging across all member states. new text end new text begin RELEASE CONDITIONS AND DEACTIVATION new text end new text begin ARTICLE XI new text end new text begin CONDITIONS FOR RELEASE new text end new text begin A member state may release funds in an escrow account to the United States government when the Compact Commission determines, by vote of member states representing at least 60 percent of the compact's total federal tax revenue representation, that: new text end new text begin (1) for activation based on refusal to count lawful electoral votes: Congress has counted the electoral votes that were lawfully certified; new text end new text begin (2) for activation based on counting of unlawful electoral votes: the unlawfully counted votes have been excluded and the electoral count corrected; new text end new text begin (3) for activation based on refusal to recognize election results: the federal government has recognized the lawful results and the lawfully elected president has assumed or retained office; and new text end new text begin (4) for activation based on federal interference: the interfering actions have ceased, any unlawful seizures have been reversed, and the affected elections have been permitted to proceed or have been remediated. new text end new text begin ARTICLE XII new text end new text begin DEACTIVATION new text end new text begin (a) Upon determining the conditions for release have been met, the Compact Commission must issue a deactivation order. new text end new text begin (b) The deactivation order applies in member states on the date specified by the Compact Commission. new text end new text begin (c) Upon deactivation, member states must release escrowed funds and employers must resume normal federal tax remittance. The compact remains in effect after deactivation and eligible for future activation. new text end new text begin RESIDENT PROTECTION PROVISIONS new text end new text begin ARTICLE XIII new text end new text begin PROHIBITION ON STATE PARTICIPATION IN FEDERAL ELECTION INTERFERENCE new text end new text begin (a) An officer or employee of Minnesota or any political subdivision thereof must not assist federal officers or agents in any action that constitutes a triggering event under article VIII, paragraph (e). new text end new text begin (b) Minnesota and its political subdivisions must not permit a jail, prison, or other detention facility owned or operated by Minnesota or any of its political subdivisions to be used to detain any person arrested in connection with federal election interference. new text end new text begin (c) Minnesota must not use state facilities, state equipment, or state property to support federal actions constituting triggering events under this act. new text end new text begin ARTICLE XIV new text end new text begin LEGAL DEFENSE FOR STATE OFFICIALS new text end new text begin Minnesota must provide legal defense for any state or local election official facing federal prosecution, civil action, or administrative proceeding arising from the official's good faith performance of duties under Minnesota election law. new text end new text begin ARTICLE XV new text end new text begin PROTECTION OF ELECTION INFRASTRUCTURE new text end new text begin (a) All voting equipment, ballots, election records, and election administration systems owned or operated by Minnesota or any political subdivision thereof are hereby declared to be critical state infrastructure essential to the sovereign functions of this state. new text end new text begin (b) A state or local official must not surrender custody of any voting equipment, ballots, election records, or election administration systems to any federal officer or agent except pursuant to a final order of a court of competent jurisdiction that has been affirmed on appeal or for which all appeals have been exhausted. new text end new text begin (c) The attorney general must immediately seek injunctive relief against any federal attempt to seize election infrastructure without proper judicial authorization. new text end new text begin IMPLEMENTATION AND INFRASTRUCTURE new text end new text begin ARTICLE XVI new text end new text begin PREACTIVATION PLANNING new text end new text begin (a) Upon enactment of this act, the commission must develop the administrative systems necessary to implement escrow operations, including: new text end new text begin (1) employer registration systems; new text end new text begin (2) electronic deposit systems mirroring existing federal deposit requirements; new text end new text begin (3) compliance monitoring and reporting systems; new text end new text begin (4) communication systems for employer notification; and new text end new text begin (5) accounting and reconciliation systems for escrow funds. new text end new text begin (b) The commissioner must complete development of all systems required for escrow operations within 12 months of enactment of this act and must maintain the systems in a state of operational readiness thereafter. new text end new text begin (c) The commissioner must conduct annual readiness exercises to ensure that escrow operations can commence within the 30-day period specified in article X, paragraph (a). new text end new text begin (d) The commissioner must coordinate with the Compact Commission and with fiscal officers of other member states to ensure interoperability and consistency of employer compliance systems across member states. new text end new text begin ARTICLE XVII new text end new text begin EMPLOYER EDUCATION AND PREPARATION new text end new text begin (a) Upon enactment of this act, the commissioner must develop educational materials for employers explaining: new text end new text begin (1) the provisions of this act; new text end new text begin (2) the circumstances under which the act may be activated; new text end new text begin (3) the procedures employers will be required to follow upon activation; new text end new text begin (4) the protections and indemnifications available to employers; and new text end new text begin (5) the systems employers should have in place to ensure rapid compliance upon activation. new text end new text begin (b) The commissioner must make the educational materials available to all employers within Minnesota and must conduct outreach to employer associations, chambers of commerce, and other business organizations. new text end new text begin (c) Upon certification that the activation threshold has been met, the commissioner must conduct intensive employer education efforts to ensure all employers are prepared for potential activation. new text end new text begin ARTICLE XVIII new text end new text begin TECHNOLOGY INFRASTRUCTURE new text end new text begin (a) The commissioner of information technology services must ensure that all technology systems required for escrow operations are: new text end new text begin (1) secure against unauthorized access; new text end new text begin (2) resilient against denial of service attacks or other disruption; new text end new text begin (3) capable of processing the volume of transactions anticipated upon activation; and new text end new text begin (4) redundant and recoverable in the event of system failure. new text end new text begin (b) The commissioner of information technology services must coordinate with corresponding agencies in other member states to ensure that technology infrastructure is consistent and interoperable across the compact. new text end new text begin ARTICLE XIX new text end new text begin LEGAL DEFENSE OF THIS ACT new text end new text begin (a) The attorney general must defend this act against any legal challenge. new text end new text begin (b) Minnesota must coordinate its legal defense with other member states through the Compact Commission. new text end new text begin (c) The legislature must appropriate funds necessary for the legal defense of this act. new text end new text begin ARTICLE XX new text end new text begin SEVERABILITY new text end new text begin (a) If any provision of this act or its application to any person or circumstance is held invalid, the invalidity does not affect other provisions or applications of this act that can be given effect without the invalid provision or application. new text end new text begin (b) The provisions of this act are severable. new text end new text begin (c) If the escrow mechanism established in section 289B.02 is held invalid, the Interstate Fiscal Sovereignty Compact established in section 289B.10 remains in effect as a coordination mechanism for other lawful resistance measures. new text end new text begin (d) If the Interstate Fiscal Sovereignty Compact is held to require congressional consent that has not been obtained, member states may continue to coordinate through informal means and the resident protection provisions of articles XIII to XV remain in effect. new text end new text begin (e) If the triggering events specified in article VIII are held to be nonjusticiable political questions, the determination of whether the events have occurred must be made by the political branches of member state governments as specified in this act. new text end new text begin (f) It is the intent of the legislature that this act provide maximum protection to the residents of Minnesota and maximum coordination with other states under any judicial outcome, and that courts construe the severability provisions liberally to effectuate this intent. new text end new text begin ARTICLE XXI new text end new text begin SAVINGS CLAUSE new text end new text begin (a) Nothing in this act authorizes obstruction of lawful federal operations conducted by a constitutionally legitimate federal government. new text end new text begin (b) Nothing in this act prevents federal agencies from conducting lawful operations within Minnesota using federal employees, federal funds, and federal equipment. new text end new text begin (c) Nothing in this act authorizes any action that would violate the Constitution of the United States as properly interpreted by a legitimate judiciary. new text end new text begin ARTICLE XXII new text end new text begin APPROPRIATIONS new text end new text begin The legislature must appropriate funds necessary to carry out this act, including: new text end new text begin (1) administration of the escrow account; new text end new text begin (2) the employer indemnification fund established under section 289B.04, subdivision 2; new text end new text begin (3) employer legal defense, including criminal defense; new text end new text begin (4) contributions to the Compact Commission and joint legal defense fund; new text end new text begin (5) development and maintenance of implementation infrastructure under article XVIII; new text end new text begin (6) legal defense of this act; and new text end new text begin (7) other purposes as may be necessary to effectuate this act. new text end new text begin ARTICLE XXIII new text end new text begin REPORTING new text end new text begin (a) The commissioner must annually report to the legislature on: new text end new text begin (1) the status of implementation infrastructure; new text end new text begin (2) the status of the employer indemnification fund; new text end new text begin (3) the status of the Interstate Fiscal Sovereignty Compact, including the number of member states and the collective federal tax revenue representation; new text end new text begin (4) any legal challenges to this act and their status; and new text end new text begin (5) recommendations for amendments to this act. new text end new text begin (b) The attorney general must report to the legislature annually on: new text end new text begin (1) legal developments affecting the validity or implementation of this act; new text end new text begin (2) coordination with other member states on legal strategy; and new text end new text begin (3) recommendations for amendments to this act. new text end new text begin EFFECTIVE DATE. new text end new text begin This section is effective the day following final enactment. new text end