Bill
HF 4845
A new top income tax bracket and inflation-adjusted brackets fund higher, more predictable local government aid (LGA) and county program aid (CPA).
Proposed by: Representatives Hollins, Gomez, Xiong, Virnig (with co-sponsors Gomez, Virnig, Hollins, Elkins)
Session: 2025-2026
Jurisdiction: Minnesota
Title: Aids to local governments; new fifth tier individual income tax rate established, and local government aid and county program aid appropriations increased
Purpose and intent
- The bill modifies Minnesota’s income tax structure by introducing a new fifth tax bracket for individuals, estates, and trusts and increases ongoing appropriations for local government aid (LGA) and county program aid (CPA).
- It aims to adjust state revenue allocations to local governments and counties while updating individual income tax brackets and brackets’ inflation adjustments.
Key provisions and changes
1) Income tax brackets and rates (Sec. 1)
- Establishes a new fifth tax bracket for high earners starting after the current top bracket thresholds.
- Updated rate schedule (for 2025 taxable years and beyond) applies to:
- Married filing jointly and surviving spouses:
- 5.35% on the first $38,770, increased to $48,700
- 6.8% on the amount over $38,770/$48,700 up to $154,020/$193,480
- 7.85% on the amount over $154,020/$193,480 up to $269,010/$337,930
- 9.85% on the amount over $269,010/$337,930 up to $1,000,000
- 10.85% on income over $1,000,000
- Married filing separately: brackets halved
- Unmarried individuals:
- 5.35% on first $26,520
- 6.8% on over $26,520 up to $87,110
- 7.85% on over $87,110 up to $161,720
- 9.85% on over $161,720 up to $600,000
- 10.85% on over $600,000
- Head of household:
- 5.35% on first $32,650
- 6.8% on over $32,650 up to $131,190
- 7.85% on over $131,190 up to $214,980
- 9.85% on over $214,980 up to $800,000
- 10.85% on over $800,000
- Provisions also address:
- How to compute Minnesota tax for nonresidents with Minnesota-source income (borrowing from federal AGI and state adjustments)
- Special rules for qualifying owners of certain entities and related add-backs and subtractions
- Effective date: Taxable years beginning after December 31, 2025.
2) Inflation adjustment of brackets (Sec. 2)
- Requires annual inflation-based adjustments to the minimum and maximum dollar amounts of each rate bracket (as per 270C.22 alignment).
- Does not change the nominal rate structure; adjusts dollar thresholds.
- Effective for taxable years beginning after December 31, 2025.
3) Local government aid (LGA) – increases (Sec. 3)
- Adjusts aid allocations to cities:
- For aids payable 2021-2023: total $564,398,012
- For aids payable 2024 onward: total $644,398,012
- The section states a new total of $799,898,012 (likely reflecting further appropriation updates)
- Effective for aids payable in 2026 and thereafter
- Key note: these figures set total aid levels rather than specifying distributions to individual cities.
4) County program aid (CPA) – increases (Sec. 4)
- Adjusts aid allocations to counties:
- For aids payable 2021-2023: $118,795,000 (with $3,000,000 for mandatory allocation)
- For aids payable 2024: $154,197,053
- For aids payable 2025 and thereafter: $151,197,053
- For total aid under 477A.0124(3): $220,009,793
- Additional transfers and administrative provisions:
- $500,000 transferred annually to the Board of Public Defense for services under section 611.27 (in the first installment date per 477A.015)
- Unexpended or unobligated transferred funds are handled by certification and inclusion in the next local aid certification
- Effective for aids payable in 2026 and thereafter
- Transfer arrangements: the Department of Revenue also makes specified transfers to the Legislative Budget Office and the Department of Education for local impact analyses, with the amounts deducted from the CPA appropriation
5) Recertification of aids (Sec. 5)
- Requires the commissioner of revenue to recalculate and recertify aids payable in 2026 under 477A.0124(3 and 4) and 477A.013(9) by July 1, 2026
- Effective upon enactment
Effective timeline and administration
- Tax changes: Effective for taxable years beginning after December 31, 2025
- Inflation adjustments: Annual thereafter
- Local government aid and county program aid: Effective for aids payable in 2026 and thereafter
- Recertification: Requires action by July 1, 2026
Impact considerations
Overall, HF 4845 seeks to fund local government needs through higher income tax revenue at the top brackets, while ensuring ongoing local government support is expanded and more predictable through updated aid totals and administrative processes.
Compiled from official sources — confirm details with the bill’s official record.
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