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'We Can Work it Out' tax bill advances in House

Co-chairs Rep. Aisha Gomez and Rep. Greg Davids converse before presenting the omnibus tax bill to the House Taxes Committee May 6. (Photo by Michele Jokinen)
Co-chairs Rep. Aisha Gomez and Rep. Greg Davids converse before presenting the omnibus tax bill to the House Taxes Committee May 6. (Photo by Michele Jokinen)

Throughout his 17 terms in the House, Rep. Greg Davids (R-Preston) has become known for lending nicknames to the biennial House tax bills, often appropriating the name of a popular song.

He borrowed from the Beatles in calling the bipartisan 2025 edition the “We Can Work It Out” tax bill.

Upon hearing this, his co-chair of the House Taxes Committee, Rep. Aisha Gomez (DFL-Mpls), replied with a lyric from the song, “Life is very short and there’s no time for fussing and fighting, my friend.”

Sponsored by Davids and unveiled at Tuesday’s committee meeting, HF2437 was replaced by a delete-all amendment and further amended. Then the committee approved it by voice vote without dissent and referred it to the House Ways and Means Committee.

“We were charged with putting a bill together that would cut $80 million, and we did that,” Davids said. “And, unless I’m missing something, local government aid to cities is intact. County program aid is intact. … We did not touch PILT [payments in lieu of taxes]. … I think this bill really protects those entities that do so much for so many people.”

“I’m happy that we limited property tax shifts in this bill,” Gomez said. “We didn’t do perfectly, but we did our best to limit them.”

Here are some of the changes that HF2437 would make to Minnesota tax law.

Income taxes

The bill would establish a “baby bonus” under the state’s child tax credit worth $100 for each child of a taxpayer born during the taxable year, effective in tax year 2028. It would also create subtractions for coerced debt and for student loan payments made by critical access dental providers. And it would modify provisions in the political contribution refund, the housing tax credit and the tax credits for short line railroads and beginning farmers.

House Taxes Committee 5/6/25

It would also establish a direct electronic filing system through which taxpayers could file individual income tax returns free of charge, requiring the software to be available on the Department of Revenue’s website. It’s estimated that the program would cost the state’s General Fund $3.65 million in the 2026-27 biennium but save money for taxpayers who would otherwise buy tax software from private vendors.

Sales and excise taxes

Among the bill’s provisions is a sales tax vendor allowance that would allow a qualifying retailer to retain a portion of sales tax collected as a vendor allowance in compensation for the cost of collecting and administering the tax. It’s estimated that the change would reduce the state’s General Fund by $6.87 million.

It would also increase the percentage of the state’s accelerated June excise tax payments for cigarette and tobacco products and alcohol from 84.5% of estimated liability to 90%, thus increasing revenue in the next biennium by $3.56 million.

The bill also includes exemptions for certain landscaping equipment and modifications on the timing of refunds for the tax on some premium cigar sales.

Property taxes

HF2437 would increase the market value exclusion for veterans with a disability – a projected tax reduction of $1 million in the next biennium – and increase from $96,000 to $110,000 the household income limit for the senior citizens’ property tax deferral program.

Among other property tax provisions, it would:

  • establish property tax reductions for certain airport property and exemptions for some property owned by Indian Tribes;
  • clarify how the attachments and appurtenances of electric utility cooperatives’ distribution systems are taxed; and
  • allow abatements for land bank property.

Local changes

The bill includes aid penalty forgiveness for the cities of Alpha, Odin, Stewart and Trosky, and adjusts the local government aid formula for Baldwin. And it establishes or extends tax increment financing districts (or makes special rules for them) in Brooklyn Center, Brooklyn Park, Eden Prairie, Edina, Maple Grove, Maplewood, Marshall, Minnetonka, Moorhead, Oakdale, Plymouth, Ramsey, St. Cloud and St. Paul.

The bill would also modify provisions regarding both the financing of local government projects and the allocation of federal tax-exempt bonds.

Other changes

Among other provisions in the bill is one that would redirect the funds of the local government cannabis aid account to the General Fund and eliminate that account, effective Jan. 2, 2026.

It would also create a four-year limitation on Sustainable Forest Incentive Act payments to no more than 100% of the property tax that would be paid on the forest land in the prior year. It’s estimated this would increase General Fund revenue by $16.6 million in the next biennium.

Among other miscellaneous provisions in the bill, it would:

  • modify the requirement that bills creating, renewing or continuing a tax expenditure include a purpose statement;
  • raise the State Agricultural Society's debt limit for state fair bonds from $30 million to $50 million;
  • require rental property owners or managing agents to provide the Revenue Department with a copy of the certificate of rent paid that’s furnished to a renter and establish a $50 penalty for failing to do so;
  • allow Minneapolis, St. Paul and Duluth to establish land-value taxation districts; and
  • extend the expiration date for the state’s film production credit.

[MORE: View the tax bill spreadsheet]

What’s in the bill?

Here are some of the bills that feature tax policy changes included in the amended version of HF2437.


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