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Staggered child tax credit payments among Walz tax recommendations

Among the many pieces of legislation signed into law in 2023, few are more universally praised than the child tax credit. More than one legislator has called it the most consequential new law of the year. Revenue Commissioner Paul Marquart agrees.

“According to Columbia University, this will cut child poverty by 33%,” Marquart told the House Taxes Committee Thursday. “That has huge ramifications in terms of higher educational achievement, better wage growth into the future, stronger workforce, better economy, better health care outcomes, better social justice outcomes, all sorts of things.”

Yet Gov. Tim Walz is suggesting a possible improvement to the law, and it makes for the second largest dollar amount in the supplemental budget agreement between the governor and legislative leaders.

Instead of just reducing a filer’s tax burden when they do their taxes in the spring, Walz is suggesting the creation of a new child tax credit payment protection pilot program that would send 50% of that payment out to qualifying families at intervals throughout the course of a year.

It’s the marquee item in HF5247, a bill sponsored by Rep. Aisha Gomez (DFL-Mpls) that was laid over for possible inclusion in this year’s tax bill.

“Studies show that one way to enhance the effectiveness of the child tax credit to lower child poverty is by having advance periodic payments,” Marquart said.

Taxpayers would be eligible for the minimum credit if their adjusted gross income is under $60,100 for married taxpayers filing a joint return with one qualifying child or $49,570 for all other filers with one qualifying child. The adjusted gross income limits increase by $9,000 for each additional qualifying child.

For fiscal year 2025, $45 million would be transferred from the General Fund to the minimum child tax credit account for a four-year program at approximately $10 million a year.

“I hear what you’re saying about getting money back in people’s pockets with the advance child tax credit,” said Rep. Jim Joy (R-Hawley). “I would encourage, moving forward, that we look at the lowest-tier tax bracket and dropping that. … I think that would also impact families and child poverty.” 

Rep. Kristin Robbins (R-Maple Grove) unsuccessfully proposed an amendment that would have increased the thresholds to qualify for the credit. It failed along party lines.

Also included in the governor’s tax bill is an item that’s already passed the House and Senate and is on its way to the governor’s desk: Making a reduction in the taxable net income limit for the corporate net operating loss deduction from 80% to 70% effective for tax years 2023 and 2024.

Among the governor’s other proposed changes in tax policy found in HF5247 are:

  • changing the date for payments of tribal nation aid to July 20 of each year (and June 20 in 2024);
  • creating an exemption for property used to distribute electricity to farmers;
  • clarifying that an exemption for an electric cooperative only applies to its distribution system and does not include its substations, or transmission or generation equipment; and
  • eliminating the annual calculation of the MinnCare tax credit for research percentage rate and permanently setting the percentage rate at 0.5%.

Since passage of the latter provision, eligible research expenditures have increased from less than $100 million in the early 2000s to over $330 million in 2021. The Revenue Department has reported that the calculation is no longer useful, as the percentage rate is already set at the minimum value of 0.5%.

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