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SF 5118

Certain jurisdictions authorization to impose various taxes

2025-2026 Regular Session Introduced by Omar Fateh

Allowed certain Minnesota jurisdictions to impose temporary local taxes (up to 1% sales/use and up to 1% income tax) with revenues dedicated to health-related uses, sunset dates, a

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Bill Summary · SF 5118

Summary of SF 5118 (2025-2026) — Minnesota

Purpose

Authorize certain Minnesota jurisdictions to temporarily impose additional local taxes (sales/use and income/corporate taxes) beyond existing local tax authority, with specified limits and sunset dates. Revenues are directed to health-related uses.

Key Provisions

Eligible jurisdictions

  • Hennepin County
  • Any city of the first class located in the Minnesota metropolitan area
  • For purposes of the bill, “resident” has the same meaning as in Minnesota tax law, with “eligible jurisdiction” applying instead of the general resident definition.

Temporary authorization for local sales and use tax

  • Eligible jurisdictions may impose by ordinance a local sales and use tax of up to 1% (on top of any existing local taxes).
  • Administration, collection, and enforcement follow Minnesota Statutes section 297A.99.
  • The authority to impose this tax expires July 1, 2029.
  • Tax may be imposed for a consecutive period not to exceed 36 consecutive calendar quarters (i.e., up to 9 years, broken into quarters; the bill caps the maximum consecutive period regardless of quarterly divisions).

Income and corporate franchise taxes

  • Eligible jurisdictions may impose:
    • A local income tax of up to 1% on the taxable income of corporations with gross income attributable to sources within the eligible jurisdiction (subject to Minn. Stat. ch. 290).
    • A local income tax of up to 1% on the taxable income of residents and nonresidents, for work done within the eligible jurisdiction.
  • Administration, collection, and enforcement governed by Minnesota Statutes, chapter 290.
  • The Minnesota Department of Revenue (Commissioner) must collect these taxes, and may coordinate collection with the state income and corporate franchise taxes.
  • All applicable penalties, interest, and enforcement provisions mirror those of state income and corporate taxes under ch. 290.
  • Effective date for any new tax: taxable year beginning after December 31 of the year the tax is imposed.
  • Tax authority expires January 1, 2030, for taxable years beginning after December 31, 2029 (i.e., a maximum of three consecutive tax years).

Use of revenues

  • Revenues (including interest and penalties) from these local taxes must be deposited into the general fund.
  • Amounts deposited are annually appropriated to the Minnesota Commissioner of Health.
  • Use of funds:
    • Payments to a designated private nonprofit hospital in Minneapolis (a Level I trauma hospital under Minn. Stat. 144.605) as determined by the Commissioner of Health.
    • Payments for otherwise uncompensated care provided by private nonprofit hospitals located in an eligible jurisdiction.

Effective date

  • Section 1 becomes effective July 1, 2026, without local approval, under Minnesota Statutes 645.023(1), clause (a).

Practical Impact

  • Financial Impact on Jurisdictions: Provides temporary, additional revenue streams for specified jurisdictions (up to 1% sales/use tax and up to 1% on corporate/individual income) for up to three taxable years (three consecutive years for income taxes) and up to 36 calendar quarters for sales/use taxes (subject to a July 1, 2029 sunset for the sales tax).
  • Use of Funds: Revenues are earmarked to health-related expenditures, notably funding a Level I trauma hospital in Minneapolis and uncompensated care at private nonprofit hospitals within eligible jurisdictions.
  • Administration: The state tax authority (Commissioner of Revenue) would administer and collect the local taxes, integrating with existing state tax systems.
  • Scope: The measure target is limited to Hennepin County and first-class cities in the metro area, narrowing the geographic impact.

Timeline and Procedures

  • Effective date: July 1, 2026 (no local approval required).
  • Sales/use tax authorization: Up to July 1, 2029 (with a maximum of 36 consecutive months of imposition).
  • Income/corporate taxes: Up to three consecutive taxable years; expires January 1, 2030 for taxable years beginning after 2029.
  • Revenue use: Annual deposits to general fund, then appropriated to health-related purposes as specified.

Additional Notes

  • This is an opt-in framework: eligible jurisdictions must enact local ordinances to impose these taxes.
  • The bill specifies that these local taxes are in addition to any other local taxes under existing law.

Compiled from official sources — confirm details with the bill’s official record.

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