1.1 	A bill for an act
1.2 	relating to state government; withholding payments to program participants under 
1.3 	certain circumstances;amending Minnesota Statutes 2025 Supplement, section 
1.4 	15.013.
1.5 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.6 	Section 1. Minnesota Statutes 2025 Supplement, section 15.013, is amended to read:
1.7 	15.013 PROGRAM PAYMENTS WITHHELD; FRAUD.
1.8 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms have 
1.9 	the meanings given.
1.10 	(b) "Entity" means any corporation, partnership, proprietorship, firm, enterprise, franchise, 
1.11 	association, organization, or any other legal entity that engages in either nonprofit or 
1.12 	profit-making activities.
1.13 	(c) "Evidence" means credible evidence obtained from an internal agency investigation, 
1.14 	audits, court records, law enforcement investigations, or investigations by other state or 
1.15 	federal agencies.
1.16 	(d) "Fraud" means an intentional or deliberate act to deprive another of property or 
1.17 	money or to acquire property or money by deception. Fraud includes knowingly submitting 
1.18 	false information to a federal, state, or local government entity for the purpose of obtaining 
1.19 	a greater compensation or benefit than the person is legally entitled. Fraud also includes 
1.20 	acts that constitute a crime against any program, or the attempts or plans to commit those 
1.21 	crimes, including but not limited to theft in violation of section 609.52, perjury in violation 
2.1 	of section 609.48, and aggravated forgery and forgery in violation of sections 609.625 and 
2.2 	609.63, and substantially similar federal laws.
2.3 	(e) "Individual" means a natural person.
2.4 	(f) "Program" means any program funded by a state or federal agency that involves the 
2.5 	transfer or disbursement of public funds or other public resources.
2.6 	(g) "Program participant" means an entity, or an individual on behalf of an entity, that 
2.7 	receives, disburses, or has custody of funds or other resources transferred or disbursed under 
2.8 	a program.
2.9 	(h) "Agency" has the meaning given in section 16B.01, subdivision 2, and includes the 
2.10 	Minnesota State Colleges and Universities.
2.11 		Subd. 2.Administrative withholding of payments. (a) The head of an agency may 
2.12 	withhold payments to a program participant in a program administered by that agency for 
2.13 	a period not to exceed 60 days if the agency head determines that a preponderance of the 
2.14 	evidence shows that the program participant has committed fraud to obtain payments under 
2.15 	the program.
2.16 	(b) Notwithstanding subdivision 3, the agency head must notify the program participant 
2.17 	of the decision to withhold payments at least 24 hours before withholding a payment. The 
2.18 	notice must:
2.19 	(1) state that payments will be withheld in accordance with this section;
2.20 	(2) state the date the administrative withholding of payments is effective;
2.21 	(3) state the reasons for withholding payments, excluding specific information that may 
2.22 	jeopardize an active investigation;
2.23 	(4) state the date the administrative withholding period terminates;
2.24 	(5) inform the program participant of the right to submit written evidence for 
2.25 	consideration by the agency head; and
2.26 	(6) inform the program participant of their rights under chapter 14 to appeal the decision 
2.27 	to withhold payment.
2.28 	(c) Following notice and to the extent practicable, the agency must ensure that any person 
2.29 	whose public funds are interrupted and who is not implicated in the suspected fraud receives 
2.30 	notice of their rights related to continued receipt of the public funds, services, or programs 
2.31 	for which they are eligible. The agency head must provide a point of contact for the impacted 
2.32 	persons.
3.1 	(d) A program participant may appeal an agency head's decision under this subdivision 
3.2 	by initiating a contested case proceeding under chapter 14 or by petitioning the court for 
3.3 	relief, including injunctive relief.
3.4 	(e) This subdivision does not apply if an agency is precluded from withholding payments 
3.5 	to a program participant by federal law or obligations under a contract.
3.6 		Subd. 3.Data classification and access. (a) During the administrative payment 
3.7 	withholding period under subdivision 2, data relating to evidence of fraud are classified as: 
3.8 	(1) confidential data on individuals pursuant to section 13.02, subdivision 3; or (2) protected 
3.9 	nonpublic data pursuant to section 13.02, subdivision 13, in the case of data not on 
3.10 	individuals.
3.11 	(b) All data relating to evidence of fraud become public at the termination of the 
3.12 	withholding period unless classified as not public data under state or federal law. The identity 
3.13 	of a complainant is private data on individuals, as defined in section 13.02, subdivision 12.
3.14 	(c) An agency may disclose data classified as confidential or protected nonpublic under 
3.15 	this section to a federal, state, or local government agency or a law enforcement agency if 
3.16 	the agency determines that access will help prevent fraud against public programs or aid 
3.17 	the law enforcement process.
3.18 		Subd. 4.Court order. The head of an agency may petition the court for a temporary 
3.19 	order pursuant to Rule 65 of the Minnesota Rules of Civil Procedure to withhold payments 
3.20 	to a program participant in a program administered by that agency if the agency head 
3.21 	determines that a preponderance of the evidence shows that the program participant has 
3.22 	committed fraud to obtain payments under the program.
3.23 		Subd. 5.Report. (a) An agency that has withheld a payment under this section must 
3.24 	report the following to the commissioner of management and budget by March 1, 2026:
3.25 	(1) the number of program participants from whom payments have been withheld;
3.26 	(2) a description of the reason the payments were withheld from the program participant;
3.27 	(3) the dollar amount of payments withheld;
3.28 	(4) the identification of the program;
3.29 	(5) whether the payments withheld were state or federal funds; and
3.30 	(6) whether the withholding of payment was challenged by a program participant and 
3.31 	the outcome of the challenge.
4.1 	(b) The commissioner of management and budget must compile the reports from the 
4.2 	agencies under paragraph (a) and submit the compiled report to the chairs and ranking 
4.3 	minority members of the committees in the house of representatives and the senate with 
4.4 	jurisdiction over state government, judiciary, health and human services, and education by 
4.5 	March 15, 2026.
4.6 		Subd. 6.Sunset. This section expires July 1, 2027.
4.7 		Subdivision 1.Definitions. (a) For purposes of this section, the following terms have 
4.8 	the meanings given.
4.9 	(b) "Credible allegation of fraud" means an allegation of fraud that has been verified by 
4.10 	the head of a state agency from any source, including but not limited to fraud complaints; 
4.11 	patterns identified through audits, civil cases, law enforcement investigations, or 
4.12 	investigations by other state or federal agencies; and court filings and other legal documents, 
4.13 	including but not limited to police reports, complaints, indictments, information, affidavits, 
4.14 	declarations, and search warrants.
4.15 	(c) "Fraud" means an intentional or deliberate act to deprive another of property or 
4.16 	money or to acquire property or money by deception or other unfair means. Fraud includes 
4.17 	intentionally submitting false information to a federal, state, or local government entity for 
4.18 	the purpose of obtaining a greater compensation or benefit than that to which the person is 
4.19 	legally entitled. Fraud also includes acts which constitute a crime against any program, or 
4.20 	the attempts or plans to commit a crime against any program, including but not limited to 
4.21 	theft in violation of section 609.52; perjury in violation of section 609.48; and aggravated 
4.22 	forgery and forgery in violation of sections 609.542, 609.625, and 609.63, and substantially 
4.23 	similar federal laws.
4.24 	(d) "Individual" means a natural person.
4.25 	(e) "Program" means any program funded by a state or federal agency that involves the 
4.26 	transfer or disbursement of public funds or other public resources.
4.27 	(f) "Program participant" means any entity or individual that receives, disburses, or has 
4.28 	custody of funds or other resources transferred or disbursed under a program.
4.29 	(g) "State agency" means any department or agency of the state as defined in sections 
4.30 	15.01 and 15.012.
4.31 		Subd. 2.Withholding of payments. (a) Except as otherwise authorized and to the extent 
4.32 	permitted by federal law, the head of any state agency may withhold payments to a program 
4.33 	participant in any program administered by that agency if the agency head determines the 
5.1 	program participant is the subject of a credible allegation of fraud under investigation that 
5.2 	is related to any program administered by that agency. The head of any agency may also 
5.3 	withhold payments to a program participant in any program administered by that agency if 
5.4 	another agency head has determined there is a credible allegation of fraud under investigation 
5.5 	and the program participant is a subject of the investigation.
5.6 	(b) The state agency head must send notice of the withholding of payments to the program 
5.7 	participant within five days of taking such action. The notice must:
5.8 	(1) state that payments are being withheld in accordance with this section;
5.9 	(2) state the reasons for withholding payments, but need not disclose specific information 
5.10 	concerning an ongoing investigation;
5.11 	(3) state that the withholding is for a temporary period and cite the circumstances under 
5.12 	which withholding shall be terminated; and
5.13 	(4) inform the program participant of the right to submit written evidence for 
5.14 	consideration by the state agency head.
5.15 	(c) Following notice, to the extent practicable, the agency must ensure that any person 
5.16 	whose public funds are interrupted and who is not implicated in the suspected fraud receives 
5.17 	notice of their rights to continued receipt of the public funds, services, or programs for 
5.18 	which they are eligible. The agency head must provide a point of contact for persons 
5.19 	impacted.
5.20 	(d) If the agency head withholds payments under this subdivision, the provider, vendor, 
5.21 	individual, associated individual, or associated entity has a right to request administrative 
5.22 	reconsideration. A request for administrative reconsideration must be made in writing, 
5.23 	stating with specificity the reasons the payment withholding decision is in error, and include 
5.24 	documents to support the request. Within 60 days after receipt of the request, the agency 
5.25 	head shall judiciously review allegations, facts, evidence available to the agency head and 
5.26 	information submitted by the provider, vendor, individual, associated individual, or associated 
5.27 	entity to determine whether the payment withholding should remain in place.
5.28 	(e) The withholding of payments shall not continue after the state agency head determines 
5.29 	there is insufficient evidence of fraud by the program participant, or after legal proceedings 
5.30 	relating to the alleged fraud are completed, unless the state agency head is authorized by 
5.31 	law to take additional action against the program participant and complies with all 
5.32 	requirements in law to take such action.
6.1 	(f) The withholding of payments is a temporary action and is not subject to appeal under 
6.2 	chapter 14.
6.3 	(g) This section does not supersede any other section of law authorizing withholding of 
6.4 	payments, including but not limited to sections 127A.21, subdivision 5; 142A.12, subdivision 
6.5 	5; 245.095, subdivision 5; and 256B.064, subdivision 2, paragraph (b).
6.6 		Subd. 3.Data classification and access. (a) During the payment withholding period 
6.7 	under this section, all data relating to a credible allegation of fraud under this section are 
6.8 	classified as: (1) confidential data on individuals pursuant to section 13.02, subdivision 3; 
6.9 	or (2) protected nonpublic data pursuant to section 13.02, subdivision 13, in the case of data 
6.10 	not on individuals.
6.11 	(b) Except for the identity of a complainant, after a determination has been made under 
6.12 	subdivision 2, paragraph (e), that withholding of payments shall not continue, all data relating 
6.13 	to a credible allegation of fraud under this section become public unless classified otherwise 
6.14 	under state or federal law. The identity of a complainant is private.
6.15 	(c) Any state agency may disclose any data classified as confidential or protected 
6.16 	nonpublic under this section to any federal, state, or local government agency, or any law 
6.17 	enforcement agency, if the state agency determines that access will help prevent fraud 
6.18 	against public programs or aid the law enforcement process.