February 22, 2023

The legislature is in full swing and quickly approaching the first committee deadline. This week our team held several key meetings with members of the tax committee and two priority issues had committee hearings.

Historic Structure Rehabilitation Tax Credit

The House Tax Committee heard legislation to reinstate the Historic Structure Rehabilitation Tax Credit. HF 1488, authored by Rep. Cheryl Youakim (DFL-Hopkins), had bipartisan support and Shawn Smith, chair of NAIOP's public policy committee, testified in support of the bill. The current bill enables the credit to be paid in the first year of service (versus over five years) and eliminates any sunset provision, though upon discussion, some term of sunset is likely to be added. The bill is likely to be included in the House omnibus tax bill, has been heard in the Senate Tax Committee, and was included in the Governor’s budget.

Homestead Market Value Exclusion

The Senate Tax Committee heard a proposal from Sen. Bill Weber (R-Luverne), which included multiple provisions that were included in the omnibus tax conference report last session. The bill, SF 973, included an increase in the homestead market value exclusion. This increase would result in a significant shift of local property taxes onto commercial/industrial properties. In an effort to mitigate that shift, the bill also lowers the state general levy by $35 million. Shawn Smith testified on behalf of NAIOP in opposition to the shift and urged members to consider significant property tax relief for C/I properties as the market is presenting unprecedented challenges.

Paid Sick & Safe Leave

The House passed the sick and safe leave provision and is headed to the Senate. This is the precursor for paid family and medical leave which is going through committee hearings in both bodies. There has been no fiscal note issued, so it is unclear how much these new programs will ultimately cost both private and public sectors—early estimates are around $2 billion and 300 state employees.
View Paid Family & Medical Leave Facts from United for Jobs »

MPLS 2040 Comp Plan Decision Could Impact All Future Entitlement Applications

A neighborhood dispute stemming from the Southwest Light Rail/Green Line Extension has made its way to the Supreme Court, whose imminent decision could impact all future land use approvals requiring a municipal comprehensive plan amendment. Residents of Minneapolis are challenging the City’s 2040 comprehensive plan under the Minnesota Environmental Rights Act (MERA). If the lower court ruling is upheld (allowing for citizen-initiated environmental review requests), this could have damaging consequences for owners and developers as their future land use applications could be subject to lengthy and costly environmental reviews on top of existing municipal procedures. The decision is likely to be reached in late March or April. HF 2004 attempts to address this.

Other Hot Topics

New laws passed since last update:

• Carbon-free energy by 2040
• Juneteenth becomes a state holiday
• Discrimination against hair styles and texture is prohibited

In order to become carbon-free in 17 years, several other measures have been introduced including banning gas-powered lawn and maintenance equipment. Another bill which has been heard in several committees, HF 772, changes the State Building Code requiring a new energy code process for new commercial buildings. Larry Kraft testified that changing new equipment is more efficient, however is not likely carbon neutral.

HF 685 prohibits corporations, developers and contractors from converting single family homes into rentals.

February Forecast & Capital Gains

In the coming weeks, the February forecast will be released a supplemental budget proposal from Governor Walz. Also, Governor Walz has proposed raising the capital gains rate—see additional information on this from United For Jobs at the link below. We will keep you up-to-date on these measures and more!
View Capital Gains Facts from United for Jobs »

If you have any questions or concerns, please reach out—your Penny Per Square Foot Fund dollars have been hard at work for you!