At The Table – May 8, 2019

Elected Officials Join in Recognizing Medical Alley Day in Minnesota; Attend MAA Annual Dinner

Just under two weeks ago, Governor Tim Walz issued a proclamation making April 24 Medical Alley Day in Minnesota. Issued to coincide with the 2019 Medical Alley Association Annual Dinner, the proclamation recognized the positive impact the Medical Alley community has on patients throughout the world and on Minnesota’s economy. You can read the full proclamation here.

Elected officials from around the state joined in and shared their appreciation for the work that is done right here, in the global epicenter of health innovation and care. Here are a few examples:

The day was capped by the 2019 Medical Alley Association Annual Dinner, which was attended by nearly 1,000 leaders from the health innovation and care industry. Representatives Dean Phillips and Tom Emmer joined for a portion of the event and learned first-hand about the groundbreaking innovation being done throughout Medical Alley. Additionally, Steve Grove – the Commissioner of DEED – spoke during the dinner’s program about his commitment to developing policies and programs that help meet the needs of current Medical Alley companies and helping the region continue to develop as a hub for investment and growth in health innovation and care.

Thank you to all the elected officials who shared their recognition of Medical Alley Day and the support of our community. We especially appreciate Representatives Phillips and Emmer for taking the time to attend our Annual Dinner and Commissioner Grove for speaking. We look forward to continuing to work with public officials at all levels of government to continue realizing the vision of Medical Alley as the global epicenter of health innovation and care!

Update from the Minnesota Legislature

With just under two weeks to go until the adjournment deadline, the Minnesota Legislature is hard at work negotiating a balanced budget that can earn the signature of Governor Tim Walz.

There are significant differences in the approaches of the DFL-controlled House and the GOP-controlled Senate. We’ve put together a quick summary of the key differences in the three bills most interesting to the Medical Alley community.

Taxes Omnibus Bill – House File 2125

Documents: Side-by-side Summary; Side-by-side Spreadsheet

Key Provisions:

  • Reinstating the Angel Tax Credit
    • House: Reinstates the Angel Tax Credit for tax years 2019 and 2020 at $10 million per year and lowers investment threshold for eligibility to $7,500 for those investing in targeted businesses (those located in Greater Minnesota or that are owned or operated by women or minorities).
    • Senate: Reinstates the Angel Tax Credit for tax year 2019 at $5 million and includes veteran-owned businesses as targeted businesses for purposes of the 50% credit set-aside.
  • Conformity to Section 179 Expensing
    • House: Fully conforms to federal Section 179 Expensing limits starting in tax year 2018 and repeals the 80% add-back and five year full-value deduction.
    • Senate: Fully conforms to federal Section 179 Expensing limits starting in tax year 2019 and repeals the 80% add-back and five year full-value deduction.
  • Conformity to Bonus Depreciation
    • Both: Conforms to federal bonus depreciation limits, retains 80% add-back and five year full-value deduction.
  • Duluth Regional Exchange District
    • House: Establishes a public economic development project to support the medical centers in Duluth, similar to the Destination Medical Center in Rochester.
    • Senate: Does not include this provision.
  • Eliminates Marriage Penalty for Minnesota Student Loan Tax Credit
    • House: Removes a disincentive for married couples to file jointly for purposes of the Minnesota student loan tax credit. This makes the tax credit more accessible for married couples and easier for employers to use as an incentive for potential employees to locate in Minnesota.
    • Senate: Does not include this provision.
  • Taxation of Federal Income
    • House: Contains multiple provisions enumerated below.
      • Global Intangible Low Tax Income (GILTI): Treats a controlled foreign corporation (CFC) as a domestic corporation if it generates GILTI for a shareholder and if it is a member of a domestic unitary group; a “deemed domestic corporation’s” income would then be attributed to Minnesota for corporate tax income purposes. Creates an optional election for companies impacted by this CFC/GILTI provision to elect worldwide reporting that is binding for ten years.
      • Deemed Repatriation Income: Includes deferred foreign income deemed by the 2017 Federal Conformity bill, to be included as subpart F income for tax year 2017 as dividend income.
    • Senate: Does not include any of the above. Conforms with Federal Law for GILTI and Foreign-Derived Intangible Income (FDII)I, does not attempt to tax deemed repatriated income.
  • Repeal of Data Center Sales Tax Exemption
    • House: Makes several changes to the data center sales tax exemption, most notably it retroactively changes the sales tax exemption for companies that have already taken advantage it – depending on when it was utilized – by narrowing what qualifies, reducing the years exempted, or lowering the credit amount.
    • Senate: Does not make any of these changes.
  • Increase to the Statewide General Levy
    • House: Changes the calculation for the Statewide General Levy (also called the Statewide Business Property Tax) from a set dollar figure to a set rate to increase the net revenues to the state on an annual basis as the value of commercial property increases. (This is similar to what happens on local property taxes.) Seasonal recreational property, which is the only other class of property subject to a statewide general levy, is not impacted by this change.
    • Senate: Does not make any of these changes.

Health & Human Services Finance Omnibus Bill – House File 2414

Documents: Still in progress

Key Provisions:

  • Creation of Rare Diseases Advisory Council (RDAC)
    • House: Funds the creation of the RDAC, for $150,000 per year, at the University of Minnesota for fiscal years 2020 and 2021 only.
    • Senate: Does not fund RDAC in this bill. The funding is carried in the Higher Education bill, and is $100,000 per year, but is permanent.
  • Extend Step Therapy Protocol Override to Public Programs
    • House: Fully funds the extension of last year’s step therapy protocol override to public programs (e.g. MinnesotaCare, Medical Assistance).
    • Senate: Does not have this provision.
  • Prescription Drug Price Transparency
    • Both: Requires prescription drug manufacturers to disclose, when certain pricing triggers are met, select inputs for that specific drug; the disclosure thresholds, what needs to be disclosed, and the intellectual property/trade secret protections are different in each bill.
  • OneCare
    • House: Adopts Governor Walz’s proposal for a state-provided, platinum level, buy-in on the individual market, similar to what is offered through MinnesotaCare and creates a gold- or silver- level buy-in option in areas where the existing individual market does not provide options. Provides for state negotiated prescription drugs for all public programs, with the option for private plans to join.
    • Senate: Does not have these provisions.
  • Provider Tax
    • House: Repeals the sunset of the provider tax (currently scheduled for the end of 2019), continues the 2% tax moving forward.
    • Senate: Does not have this provision.

Jobs & Economic Development Finance Omnibus Bill – House File 2208

Documents: Side-by-Sides Language and Spreadsheet

  • Metropolitan Jobs Training Program (MJTP)
    • House: Establishes a Metropolitan Jobs Training Program (MJTP); this mimics the successful Jobs Training Incentive Program (JTIP) that is available in Greater Minnesota and provides a state match to companies for training workers in newly created positions.
    • Senate: Does not contain this provision.
  • Minnesota Investment Fund (MIF) & Job Creation Fund (JCF)
    • House: Reduces funding to MIF by $10.1 million for fiscal years 2020 and 2021 and JCF by $2.5 million in fiscal years 2020 and 2021; reduces MIF by $14 million and JCF by $5 million in fiscal years 2022 and 2023; increases maximum MIF award to $2 million.
    • Senate: Does not reduce appropriations to MIF or JCF from current law but does not increase maximum MIF award.
  • SciTechsperience Internship Program
    • House: Includes funding for the SciTechsperience program as part of a pool of potential awardees of competitive grants.
    • Senate: Includes $1.5 million directly for SciTechsperience  in each of fiscal years 2020 and 2021.
  • Paid Family Leave
    • House: Creates a new state-operated paid family leave program; levies tax on employees and employers to fund it, modeled off of the Unemployment Insurance program, raising $400 million in each of fiscal years 2021 and 2022.
    • Senate: Does not contain this program.

Other Notable Differences Between House and Senate

  • Changes to the Gas Tax
    • House: Increases the per-gallon gas tax by 20 cents per gallon, spread out over a number of years. The gas tax is constitutionally dedicated to be spent on roads and bridges. Makes several changes to the vehicle registration tax with the net result of increasing revenue to the state, which is also constitutionally dedicated to roads and bridges. Increases the Motor Vehicle Sales Tax by .375% to 6.875%, the proceeds of which are split between road and bridge maintenance (57%) and transit (43%).
    • Senate: Contains none of these changes.
  • Education Funding
    • House: Increases the allotment to the general education formula by 3% in fiscal year 2020 and 2% in fiscal year 2021, for a total of $520.5 million in those two years combined, and $702 million in fiscal years 2022 and 2023.
    • Senate: Increases the allotment to the general education formula by .5% in each of fiscal years 2020 and 2021, for a total of $96 million in those two years and $139 million in fiscal years 2022 and 2023.
  • Note: Funding to the general education formula was already projected to increase under current law by $274 million in fiscal years 2020 and 2021 and another $139 million in fiscal years 2022 and 2023; the amounts from the House and Senate bills would be in addition to these amounts.

Major Issues Outstanding That Are Not in any of the Budget Bills

  • Reinsurance
    • House: Has not passed a reinsurance bill. The HHS omnibus bill does contain Gov. Walz’s plan to buy-down premiums for those purchasing plans on the individual market, similar to what was in effect for 2017 under former Governor Dayton.
    • Senate: Passed a bill continuing Minnesota’s reinsurance program for an additional three years.
  • Opioid Stewardship Fee
    • Both: The House and Senate each passed separate plans for raising $20 million from drug manufacturers — primarily those that produce opioids — and wholesale distributors, as well as for spending these dollars. These bills are currently in a standalone conference committee that is working through the differences.

As you can see, there is quite a bit of ground for the sides to cover before adjournment on May 20. Whether they finish on May 20, May 22, June 1 or sometime later this year, we’ll break the full conclusion down for you shortly after the gavel falls in our 2019 Minnesota Legislative Session Recap.

Lilly’s Legislative Life

The most exciting part for lobbyists is upon us, the notorious conference committees. This means all the omnibus bills have passed out of each legislative body and the House and Senate appointed conferees from each body to negotiate the differences between their two versions of each particular bill. The gavel is passed each day from the Senate Chair to the House Chair, and committees will adopt same and similar language before the real fun begins. Conference committees are at the call of the chair, meaning lobbyists and advocates will be spending plenty of time waiting around while negotiations take place.

A friendly reminder that with only 13 days left of session, that there will be plenty of long and sleepless nights, so please be extra kind to both partisan and nonpartisan staff. These folks are the ones putting in extra hours behind the scenes to make sure the Legislature gets done on time. Fingers crossed we can work our way through negotiations and get some good bills passed.

Good luck. We made it to the final stretch. See you next week with some (hopefully) exciting updates.

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