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HF 3616

Individual income tax rates modified, county program aid increased to offset county costs associated with federal Supplemental Nutrition Assistance Program changes, school district revenue adjusted, commissioner required to estimate costs, and money appropriated.

2025-2026 Regular Session Introduced by Nathan Coulter and 3 co-sponsors

Minnesota would raise top income tax rates and create a fifth tier to offset anticipated SNAP-related costs, while increasing county aid and adjusting school funding accordingly.

Author added Feist
#appropriations #foodandnutrition #governmentaloperations-federal #taxation-income
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WeVote Research Nonpartisan
Bill Summary · HF 3616

Summary of HF 3616 (2025-2026) – Minnesota

HF 3616 proposes changes to individual income tax rates, adjustments to county program aid in response to federal SNAP (Supplemental Nutrition Assistance Program) changes, adjustments to school district revenue, mandatory cost estimates by the Commissioner, and related appropriations.

1) Main purpose and intent

  • Modernize and adjust Minnesota’s income tax structure, including higher brackets and a potential new fifth tier rate to offset anticipated state costs from SNAP policy changes.
  • Offset county costs associated with federal SNAP changes via increased County Program Aid (CPA), and modify school district revenue to reflect SNAP-related adjustments.
  • Require the state budget office to estimate the costs of these changes (including federal funding losses) and use those estimates to set tax rates.
  • Provide targeted funding appropriations to education.

2) Key provisions and changes

A. Compensatory education revenue (Sec. 1)

  • Keeps existing compensatory revenue framework but updates calculation mechanics for fiscal years 2024–2026.
  • For 2027 and beyond, introduces a new statewide compensatory revenue formula tied to a “statewide compensatory SNAP adjustment factor,” designed to account for changes in SNPA and direct certification data.
  • Establishes minimum statewide compensatory revenue floors for 2026 and 2027 (e.g., $838,947,000 for 2026 and $857,152,000 for 2027), with proportional adjustments if targets are not met.
  • Creates a new mechanism to compute an adjustment factor using the ratio of compensatory loss adjustments to direct certification pupil counts; the adjustment factor is intended to address SNPA-related enrollment changes.

B. Individual income tax rates (Sec. 2)

  • Amends rate schedules for married, single, and head-of-household filers.
  • Replaces several bracket thresholds with new amounts (e.g., first bracket for joint filers starts at $48,700; higher-bracket thresholds updated across filing statuses).
  • Retains the tiered structure where the top bracket (over the highest threshold) is set at a rate tied to a new fifth-tier rate under subsection (g) beginning after 2025.
  • Adds a special mechanism (subsection (g)) to set the top rate for taxable years after 2025 through 2027, with the rate aligned to raise revenue necessary to cover the changes described, as certified by the Commissioner of Management and Budget (MMB). The rate determined for later years remains effective through taxable years 2027.

C. Inflation adjustments (Sec. 3)

  • Requires annual inflation adjustments to brackets (excluding the fifth tier), aligning with the 270C.22 approach. Effective for tax years beginning after 12/31/2025.

D. County aid adjustments related to SNAP changes (Sec. 4)

  • For 2026 onward, counties receive increased CPA funding to offset costs from SNAP work-requirement changes and related systems upgrades (MAXIS).
  • Establishes an allocation method: the SNAP-related increase is distributed proportionally between county need aid and county tax-base equalization aid based on each program’s share of total county program aid.

E. State cost estimation and funding losses (Secs. 5)

  • Requires the MMB (by 6/30/2026) to estimate total 2027–2028 costs related to:
    • The compensatory SNAP adjustment factor,
    • The CPA increase tied to SNAP changes,
    • Other related state costs (e.g., elimination/reduction of certain federal SNAP funds, matching funds, higher school meal costs).
  • The Department of Revenue must use these estimates to set the fifth-tier income tax rate to offset these costs.

F. Appropriations and education funding (Sec. 6)

  • Proposes appropriations from the general fund to the Department of Education for additional general education aid under existing statutes, with placeholder amounts for 2027.

3) Who/what is affected

  • Minnesota residents: changes to income tax brackets and top-tier rates, with potential higher taxes to fund new SNAP-related costs.
  • Counties: potential increase in CPA to offset county costs from SNAP rule changes.
  • School districts: potential changes in revenue to reflect SNAP adjustments and related cost shifts.
  • Department of Education and Department of Revenue: new calculation and reporting responsibilities; impact on funding allocations.
  • State Budget Office/MMB: required cost estimates to determine fifth-tier rate.

4) Procedural and timeline aspects

  • Effective dates: many provisions target tax years beginning after 12/31/2025; certain rate computations and adjustments apply to 2027–2028 costs.
  • The MMB must certify cost estimates by 6/30/2026 for use in setting the fifth-tier tax rate.
  • Sec. 1 and Sec. 4 mechanisms hinge on SNAP policy changes and direct certification data from the fall of 2024 vs. prior years.

Note: This summary presents statutory changes as drafted; final implementation depends on legislative passage and any subsequent amendments.

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

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