With the threat of a lengthy special session growing, Minnesota’s legislative leaders deserve credit for buckling down and getting a biennial budget passed with a minimum of added time. The Medical Alley Association is grateful to legislators and their staffs for their hard work this session!
A full analysis of the session is forthcoming, but with the dust all but settled, we wanted to give you an update on where the key components of our legislative agenda ended up.
Reinstate and Make Permanent the Angel Investment Tax Credit (AITC)
Goal: Reinstate the angel investment tax credit
Bills: HF1268 (Kotzya-Witthuhn); SF788 (Anderson, P.)
Status: Included in omnibus tax bill (SSHF5 – Marquart)
Disposition: The final omnibus tax bill funds the AITC at $10 million for each of tax years 2019 and 2021.
Background: We are very pleased that the AITC will be reinstated and funded at $10 million in each of tax years 2019 and 2021. Reinstating this program will give startups more ready access to capital and improve the climate for startups in Minnesota. From 2013 to 2017, 131 health technology companies raised more than $108 million and leveraged an additional $372 million in funding thanks to the AITC. Additionally, with competitor states such as Illinois and Massachusetts recently establishing similar credits, this will help Minnesota remain an attractive option for innovative startups to locate and grow. The work done by Medical Alley Association members is a significant reason this successful program is back and we are grateful for their hard work and dedication to making it happen!
Enhance and Simplify Existing Incentives for Growth and Expansion in Minnesota
Goal: Create an alternative simplified research and development credit
Bills: HF1455 (Sauke); SF996 (Senjem)
Status: Not Included
Disposition: While each of these bills received hearings in their respective body’s tax committee, this language was not included in either of the House or Senate omnibus tax bill.
Prepare New Talent by Leveraging Existing Partnerships and Developing New Ones
Goal: Expand the Jobs Training Incentive Program and increase the maximum amount awarded by the Minnesota Investment Fund (MIF)
Bills: HF1507 (Stephenson); SF1579 (Hoffman)
Status: Not included
Disposition: The final omnibus jobs and economic development bill does not fund the Metropolitan Job Training Grant Program or expand the maximum MIF award.
Background: Language implementing HF1507 was included as part of the House Omnibus Jobs and Economic Development, Energy and Climate, and Telecommunications Policy and Finance bill (HF2208 – Mahoney). To accommodate the concerns of Greater Minnesota interest groups, rather than expanding the Jobs Training Incentive Program (JTIP) as the bill originally did, the modified language would have created a parallel program specifically for the metro area instead. Language which would have increased the maximum MIF award amount to $2 million was also included.
The Senate version of the bill was not heard and was not included in the Senate omnibus jobs and economic growth finance bill.
Expand Science from Scientists
Goal: Help Science from Scientists expand their STEM education program
Bills: HF1969 (Erickson); SF1899 (Housley)
Status: Not Included
Disposition: These bills would have provided a one-time grant of $800,000 to Science from Scientists so they can expand into schools on their waiting list, particularly in Greater Minnesota. Each bill received a hearing in its chamber’s respective education finance committee. Unfortunately, the language was not included in the omnibus bill in either chamber. MAA will be working to continue educating legislators on this program and the success it has had reducing the achievement gap in STEM.
Fund the SciTechsperience Program
Goal: Continue state support of the SciTechsperience Program
Bills: HF955 (Koegel); SF1652 (Pratt)
Status: Included in omnibus jobs and economic development bill (SSSF2 – Mahoney)
Disposition: This program received a $1.7 million total appropriation for fiscal years 2020 and 2021. We appreciate this successful program will continue to receive funding; however, the appropriation is a decrease of $1 million from this biennium’s appropriation.
Background: The House and Senate each included this program in their omnibus jobs bill. The House version included this program among several that have access to a pool of grant money, but would not have guaranteed it any of that funding. The Senate version (SF2611 – Pratt) called for a $1.5 million per year grant to this program in FY2020 and FY2021.
The final compromise will directly fund SciTechsperience, rather than simply giving it access to the grant pool, but at a lower level than the Senate bill alone would have.
Establish a State-Level Rare Diseases Advisory Council
Goal: Create a Rare Diseases Advisory Council
Bills: HF684 (Mann); SF973 (Miller)
Status: Signed into Law (SF973)
Disposition: This bill was passed on the last night of session and signed into law as a stand-alone bill. It passed unanimously in both the House and Senate. The final language funds the council for four years at the University of Minnesota. We were very supportive of this initiative throughout session and are very pleased to see it enacted.
Background: This language was included in omnibus bills in both the House and Senate. The House put the language and accompanying appropriation for two years into the omnibus health and human services finance bill (HF2414 – Liebling); the Senate included it as part of their higher education finance omnibus bill (SF2415 – Anderson, P.). It is funded at slightly less than requested, but as an ongoing concern.
Improve Access by Eliminating Barriers Hindering Coordinated Care and Impeding Care Delivery
Goal: Modernize the Minnesota Health Records Act
Bills: HF831 (Halverson); SF1575 (Pratt)
Status: Not Included
Disposition: This bill did not make committee deadline in either body. The coalition advocating for this change will be meeting throughout the interim in an attempt to build future support for this legislation.
Develop and Increase Use of Non-Opioid Pain Management Techniques
Goal: Establish an Opioid Technology Challenge grant program
Bills: HF375 (Albright)
Status: Not Included
Disposition: This bill would have created a program and grant competition, similar to one that exists in Ohio, for healthcare startups focused on addressing the opioid epidemic and addiction issues through technological innovation. The legislation did not receive a hearing this year. However, MAA will continue working with the author to improve the legislation and ensure that it receives a hearing next session.
Other Initiatives on Which Medical Alley Association Was Active
Provisions We Advocated For
Creation of Launch Minnesota (previously The Minnesota Innovation Collaborative)
Goal: Improve Minnesota’s startup climate through the creation of a public-private partnership designed to aid entrepreneurs
Bills: HF2449 (Noor); SF2484 (Champion)
Status: Included in omnibus jobs and economic development bill (SSSF2 – Mahoney)
Disposition: Language creating Launch Minnesota was included in the omnibus jobs and economic development finance bill. The allotted $5 million will help start this new state office charged with providing grants, education, and assistance to startups across industries and throughout the state. An advisory board, largely made up of private sector members, will be responsible for advising Launch Minnesota and working to develop a plan to spin off pieces into the private sector.
Background: Launch Minnesota was a major initiative of Governor Walz and DEED Commissioner Steve Grove. Medical Alley Association worked closely with DEED throughout session to get the idea and language to a place where it could be accepted by the House and Senate and signed into law. We issued several letters in support of the language to key legislators in both chambers and pushed for its inclusion during negotiations. We look forward to working with Commissioner Grove, the Launch Minnesota staff, and the advisory board to help this initiative succeed and strengthen Minnesota’s place as a center for startup development and growth.
Creation of the Duluth Regional Exchange Council (aka Duluth DMC)
Goal: Help Duluth grow as a healthcare hub through increased investment in the city and the creation of a regional exchange council
Bills: HF1216 (Schultz); SF1207 (Simonson)
Status: Included in the omnibus tax bill (SSHF5 – Marquart)
Disposition: This language was included in the omnibus tax bill. The bill will provide $97.2 million in available public infrastructure bonds that can be accessed when Duluth asks for them and appropriates $8.1 million per year from 2022 to 2055 to pay the interest on these bonds.
Background: This language will create a regional exchange district in Duluth, similar to Rochester’s Destination Medical Center, for purposes of increasing investment in the city. The state will be allowed to sell appropriation bonds when certain criteria are met for the purposes of public infrastructure projects, including certain investment from a benefiting medical entity. The bill will also increase the city’s local option sales tax (based on voter approval) and requires a certain portion to be used for road improvements within the district.
Reduction of the Statewide General Levy
Goal: Reduce the property tax burden on all commercial/industrial property in the state
Bills: SF5 (Chamberlain)
Status: Included in the omnibus tax bill (SSHF5 – Marquart)
Disposition: Language reducing the statewide general levy by $47 million from $784.6 million to $737.1 million (also reducing the levy on seasonal recreation property by almost $3 million) was included in this bill. The result will be a property tax reduction for all commercial/industrial property in the state.
Background: This language was originally included in the Senate omnibus tax bill (SF5) during regular session. Medical Alley Association noted its support for this provision in a letter to the regular session tax conference committee.
Conformity to Section 179 Expensing Limits
Goal: Bring Minnesota into conformity with new federal section 179 expensing limits and bonus depreciation allowances and remove the 80% add-back and five-year phase-in
Bills: HF515 (Poppe)/SF1239 (Nelson)
Status: Partially included in the omnibus tax bill (SSHF5 – Marquart)
Disposition: Conformity to the higher – permanent – federal law limits for section 179 expensing was included in the omnibus tax bill; however, the 80% add-back and five-year phase-in were retained. The same is true for the higher – temporary – bonus depreciation allowance. Medical Alley Association supported bringing the state into section 179 conformity with federal law, but is disappointed the 80% add-back and five-year phase-in were retained.
Background: Both the House and Senate omnibus tax bill conformed to the permanent, higher federal law limits for section 179 expensing and eliminated the 80% add-back and five-year phase-in. However, reaching an agreement on conformity to the higher bonus depreciation allowance required the retention of the 80% add-back and five-year phase-in.
Provisions We Expressed Concerns About
Retroactive Changes to Qualified Data Center Sales Tax Exemption
Goal: Protect Minnesota’s reputation as a great state for businesses to invest and expand in
Bills: HF2125 (Marquart)
Status: Not Included
Disposition: This language was not included in the omnibus tax bill.
Background: Initially proposed by Governor Dayton in 2017, changes to the qualified data center sales tax exemption were put forward by Governor Walz as part of his 2020-21 budget proposal. This language attempted to retroactively change the definition of what can be claimed under this exemption and alter the definition moving forward.
The retroactive changes would have been especially problematic, as dozens of companies would have been forced to pay sales tax on investments they made in Minnesota with the understanding that no tax would apply. Medical Alley Association strongly opposed the retroactive changes and communicated to the legislature – through testimony and letters – the extremely negative impact this change would have on Minnesota’s reputation for investment and expansion by businesses of all sectors.
State Taxation of Foreign Income Recognized Under the 2017 Tax Cuts and Jobs Act (TCJA)
Goal: Keep global intangible low tax income (GILTI) as non-taxable income at the state level
Bills: HF2125 (Marquart)
Status: Not Included
Disposition: This language was not included in the omnibus tax bill.
Background: Governor Walz and the House DFL both proposed including GILTI that is recognized by the federal government under the TJCA in taxable income. Governor Walz, as part of his budget, wanted to include an appropriate portion of the income for Minnesota tax purposes. The House DFL’s plan proposed that a controlled foreign corporation (CFC) that generates GILTI income becomes part of the domestic unitary group, allowing its income to be apportioned based on the unitary group’s sales in Minnesota. Needless to say this was very complicated and there was significant uncertainty as to whether it would function properly.
Similarly, the House proposed taxing deferred foreign income that was repatriated as part of TJCA. No portion of this income was included for state tax purposes.
