SF 3618
Introduction - 94th Legislature (2025 - 2026)
Posted on 02/18/2026 10:45 a.m.
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A bill for an act
relating to financing state and local government; modifying individual income tax
rates; increasing county program aid to offset county costs associated with federal
Supplemental Nutrition Assistance Program changes; adjusting school district
revenue for changes in the Supplemental Nutrition Assistance Program; requiring
the commissioner of management and budget to estimate certain costs; appropriating
money; amending Minnesota Statutes 2024, sections 290.06, subdivision 2d;
477A.03, subdivision 2b; Minnesota Statutes 2025 Supplement, sections 126C.10,
subdivision 3; 290.06, subdivision 2c.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2025 Supplement, section 126C.10, subdivision 3, is amended
to read:
Subd. 3.
Compensatory education revenue.
(a) A district's compensatory revenue
equals the sum of its compensatory revenue for each building in the district and the amounts
designated under Laws 2015, First Special Session chapter 3, article 2, section 70, subdivision
8, for fiscal year 2017. Revenue shall be paid to the district and must be allocated according
to section 126C.15, subdivision 2.
(b) For fiscal years 2024, 2025, and 2026, the compensatory education revenue for each
building in the district equals the formula allowance minus $839 times the compensation
revenue pupil units computed according to section 126C.05, subdivision 3.
(c) For fiscal year 2027 and later, the compensatory education revenue for each building
in the district equals deleted text begin itsdeleted text end new text begin the product of the: (1)new text end compensatory pupils deleted text begin multiplied by thedeleted text end new text begin ; (2)new text end
building compensatory allowancenew text begin ; and (3) statewide compensatory Supplemental Nutrition
Assistance Program adjustment factornew text end .
(d) When the district contracting with an alternative program under section 124D.69
changes prior to the start of a school year, the compensatory revenue generated by pupils
attending the program shall be paid to the district contracting with the alternative program
for the current school year, and shall not be paid to the district contracting with the alternative
program for the prior school year.
(e) When the fiscal agent district for an area learning center changes prior to the start of
a school year, the compensatory revenue shall be paid to the fiscal agent district for the
current school year, and shall not be paid to the fiscal agent district for the prior school year.
(f) Notwithstanding paragraph (c), for fiscal year 2026, if the sum of the amounts
calculated under paragraph (c) is less than $838,947,000, the commissioner must
proportionately increase the revenue to each building until the total statewide revenue
calculated for each building equals $838,947,000.
(g) Notwithstanding paragraph (c), for fiscal year 2027 and later, if the sum of the
amounts calculated under paragraph (c) is less than $857,152,000, the commissioner must
proportionately increase the revenue to each building until the total statewide revenue
calculated for each building equals $857,152,000.
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(h) For fiscal year 2027 and later, the Department of Education must calculate the
statewide compensatory Supplemental Nutrition Assistance Program adjustment factor. The
adjustment factor equals:
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(1) one; plus
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(2) the ratio of the compensatory loss adjustment to the total number of pupils identified
through direct certification for that year.
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The compensatory loss adjustment equals the greater of zero or the difference between the
number of pupils identified through direct certification on the basis of participation in the
Supplemental Nutrition Assistance Program during the fall of 2024 and the number of pupils
identified through direct certification on the basis of participation in the Supplemental
Nutrition Assistance Program during the fall of the previous fiscal year.
new text end
new text begin EFFECTIVE DATE. new text end
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This section is effective for revenue for fiscal year 2027 and later.
new text end
Sec. 2.
Minnesota Statutes 2025 Supplement, section 290.06, subdivision 2c, is amended
to read:
Subd. 2c.
Schedules of rates for individuals, estates, and trusts.
(a) The income taxes
imposed by this chapter upon married individuals filing joint returns and surviving spouses
as defined in section 2(a) of the Internal Revenue Code must be computed by applying to
their taxable net income the following schedule of rates:
(1) On the first deleted text begin $38,770deleted text end new text begin $48,700new text end , 5.35 percent;
(2) On all over deleted text begin $38,770deleted text end new text begin $48,700new text end , but not over deleted text begin $154,020deleted text end new text begin $193,480new text end , 6.8 percent;
(3) On all over deleted text begin $154,020deleted text end new text begin $193,480new text end , but not over deleted text begin $269,010deleted text end new text begin $337,930new text end , 7.85 percent;
(4) On all over deleted text begin $269,010deleted text end new text begin $337,930, but not over $1,667,000new text end , 9.85 percentdeleted text begin .deleted text end new text begin ; and
new text end
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(5) On all over $1,667,000, the percentage determined under paragraph (g).
new text end
Married individuals filing separate returns, estates, and trusts must compute their income
tax by applying the above rates to their taxable income, except that the income brackets
will be one-half of the above amounts after the adjustment required in subdivision 2d.
(b) The income taxes imposed by this chapter upon unmarried individuals must be
computed by applying to taxable net income the following schedule of rates:
(1) On the first deleted text begin $26,520deleted text end new text begin $33,310new text end , 5.35 percent;
(2) On all over deleted text begin $26,520deleted text end new text begin $33,310new text end , but not over deleted text begin $87,110deleted text end new text begin $109,430new text end , 6.8 percent;
(3) On all over deleted text begin $87,110deleted text end new text begin $109,430new text end , but not over deleted text begin $161,720deleted text end new text begin $203,150new text end , 7.85 percent;
(4) On all over deleted text begin $161,720deleted text end new text begin $203,150, but not over $1,000,000new text end , 9.85 percentdeleted text begin .deleted text end new text begin ; and
new text end
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(5) On all over $1,000,000, the percentage determined under paragraph (g).
new text end
(c) The income taxes imposed by this chapter upon unmarried individuals qualifying as
a head of household as defined in section 2(b) of the Internal Revenue Code must be
computed by applying to taxable net income the following schedule of rates:
(1) On the first deleted text begin $32,650deleted text end new text begin $41,010new text end , 5.35 percent;
(2) On all over deleted text begin $32,650deleted text end new text begin $41,010new text end , but not over deleted text begin $131,190deleted text end new text begin $164,800new text end , 6.8 percent;
(3) On all over deleted text begin $131,190deleted text end new text begin $164,800new text end , but not over deleted text begin $214,980deleted text end new text begin $270,060new text end , 7.85 percent;
(4) On all over deleted text begin $214,980deleted text end new text begin $270,060, but not over $1,334,000new text end , 9.85 percentdeleted text begin .deleted text end new text begin ; and
new text end
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(5) On all over $1,334,000, the percentage determined under paragraph (g).
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(d) In lieu of a tax computed according to the rates set forth in this subdivision, the tax
of any individual taxpayer whose taxable net income for the taxable year is less than an
amount determined by the commissioner must be computed in accordance with tables
prepared and issued by the commissioner of revenue based on income brackets of not more
than $100. The amount of tax for each bracket shall be computed at the rates set forth in
this subdivision, provided that the commissioner may disregard a fractional part of a dollar
unless it amounts to 50 cents or more, in which case it may be increased to $1.
(e) An individual who is not a Minnesota resident for the entire year must compute the
individual's Minnesota income tax as provided in this subdivision. After the application of
the nonrefundable credits provided in this chapter, the tax liability must then be multiplied
by a fraction in which:
(1) the numerator is the individual's Minnesota source federal adjusted gross income as
defined in section 62 of the Internal Revenue Code and increased by:
(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
and 20, and 290.0137, paragraph (a); and reduced by
(ii) the Minnesota assignable portion of the subtraction for United States government
interest under section 290.0132, subdivision 2, the subtractions under sections 290.0132,
subdivisions 9, 14, 15, 18, 27, 31, and 32, and 290.0137, paragraph (c), after applying the
allocation and assignability provisions of section 290.081, clause (a), or 290.17; and
(2) the denominator is the individual's federal adjusted gross income as defined in section
62 of the Internal Revenue Code, increased by:
(i) the additions required under sections 290.0131, subdivisions 2, 6, 8 to 10, 16, 17, 19,
and 20, and 290.0137, paragraph (a); and reduced by
(ii) the subtractions under sections 290.0132, subdivisions 2, 9, 14, 15, 18, 27, 31, and
32, and 290.0137, paragraph (c).
(f) If an individual who is not a Minnesota resident for the entire year is a qualifying
owner of a qualifying entity that elects to pay tax as provided in section 289A.08, subdivision
7a, paragraph (b), the individual must compute the individual's Minnesota income tax as
provided in paragraph (e), and also must include, to the extent attributed to the electing
qualifying entity:
(1) in paragraph (e), clause (1), item (i), and paragraph (e), clause (2), item (i), the
addition under section 290.0131, subdivision 5; and
(2) in paragraph (e), clause (1), item (ii), and paragraph (e), clause (2), item (ii), the
subtraction under section 290.0132, subdivision 3.
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(g) For taxable years beginning after December 31, 2025, and before January 1, 2028,
the commissioner of revenue must calculate the tax rate that applies under paragraphs (a),
clause (5); (b), clause (5); and (c), clause (5). The commissioner must set the rate at the
level the commissioner estimates would be necessary to raise an amount of revenue in fiscal
years 2027 and 2028 equal to the cost of the changes described in section 5, as certified by
the commissioner of management and budget. The rate established by the commissioner
for taxable years beginning after December 31, 2025, and before January 1, 2028, remains
in effect for taxable years beginning after December 31, 2027.
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new text begin EFFECTIVE DATE. new text end
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This section is effective for taxable years beginning after December
31, 2025.
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Sec. 3.
Minnesota Statutes 2024, section 290.06, subdivision 2d, is amended to read:
Subd. 2d.
Inflation adjustment of brackets.
The commissioner shall annually adjust
the minimum and maximum dollar amounts for each rate bracket for which a tax is imposed
in subdivision 2cnew text begin , except the fifth tier under paragraphs (a), clause (5); (b), clause (5); and
(c), clause (5),new text end as provided in section 270C.22. The statutory year is taxable year deleted text begin 2019deleted text end new text begin 2026new text end .
The rate applicable to any rate bracket must not be changed. The dollar amounts setting
forth the tax shall be adjusted to reflect the changes in the rate brackets. The rate brackets
as adjusted must be rounded to the nearest $10 amount. If the rate bracket ends in $5, it
must be rounded up to the nearest $10 amount. The commissioner shall determine the rate
bracket for married filing separate returns after this adjustment is done. The rate bracket
for married filing separate must be one-half of the rate bracket for married filing joint.
new text begin EFFECTIVE DATE. new text end
new text begin
This section is effective for taxable years beginning after December
31, 2025.
new text end
Sec. 4.
Minnesota Statutes 2024, section 477A.03, subdivision 2b, is amended to read:
Subd. 2b.
Counties.
(a) deleted text begin For aids payable in 2021 through 2023, the total aid payable
under section 477A.0124, subdivision 3, is $118,795,000, of which $3,000,000 shall be
allocated as required under Laws 2014, chapter 150, article 4, section 6. For aids payable
in 2024, the total aid payable under section 477A.0124, subdivision 3, is $154,197,053, of
which $3,000,000 shall be allocated as required under Laws 2014, chapter 150, article 4,
section 6.deleted text end For aids payable in 2025 and thereafter, the total aid payable under section
477A.0124, subdivision 3, is $151,197,053. On or before the first installment date provided
in section 477A.015, paragraph (a), $500,000 of this appropriation shall be transferred each
year by the commissioner of revenue to the Board of Public Defense for the payment of
services under section 611.27. Any transferred amounts not expended or encumbered in a
fiscal year shall be certified by the Board of Public Defense to the commissioner of revenue
on or before October 1 and shall be included in the next certification of county need aid.
(b) deleted text begin For aids payable in 2021 through 2023, the total aid under section 477A.0124,
subdivision 4, is $145,873,444.deleted text end For aids payable in 2024 and thereafter, the total aid under
section 477A.0124, subdivision 4, is $190,471,391. The commissioner of revenue shall
transfer to the Legislative Budget Office $207,000 annually for the cost of preparation of
local impact notes as required by section 3.987, and other local government activities. The
commissioner of revenue shall transfer to the commissioner of education $7,000 annually
for the cost of preparation of local impact notes for school districts as required by section
3.987. The commissioner of revenue shall deduct the amounts transferred under this
paragraph from the appropriation under this paragraph. The amounts transferred are
appropriated to the Legislative Coordinating Commission and the commissioner of education
respectively.
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(c) No later than June 30, 2026, the commissioner of management and budget must
certify to the commissioner of revenue an estimate of the cost to Minnesota counties of
changes to Supplemental Nutrition Assistance Program work requirements under Public
Law 119-21. This cost estimate must include county costs for upgrades to the MAXIS
system. For aids payable in 2026 and later, the amount of aid payable under this subdivision
is increased by the amount certified under this paragraph. The increase under this section
must be allocated proportionally between county need aid under paragraph (a) and county
tax-base equalization aid under paragraph (b) based on each aid's share of total county
program aid for aids payable in 2026.
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new text begin EFFECTIVE DATE. new text end
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This section is effective for aids payable in 2026 and later.
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Sec. 5. new text begin COMMISSIONER OF MANAGEMENT AND BUDGET TO ESTIMATE
FEDERAL FUNDING LOSS.
new text end
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(a) No later than June 30, 2026, the commissioner of management and budget must
calculate and certify to the commissioner of revenue an estimate of the total cost in fiscal
years 2027 and 2028 of:
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(1) the statewide compensatory Supplemental Nutrition Assistance Program adjustment
factor under Minnesota Statutes, section 126C.10, subdivision 3;
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(2) the amount of the aid increase under Minnesota Statutes, section 477A.03, subdivision
2b, paragraph (c); and
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(3) additional costs to the state related to:
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(i) the elimination of federal funding for SNAP-Education;
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(ii) the reduction of federal funding for Supplemental Nutrition Assistance Program
administrative costs;
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(iii) Supplemental Nutrition Assistance Program state matching funds required based
on the state's payment error rate; and
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(iv) increased school meal costs due to changes to the Supplemental Nutrition Assistance
Program under Public Law 119-21.
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(b) The commissioner of revenue must use the amount certified under this section to
calculate the rate for the fifth tier of the individual income tax, as provided in Minnesota
Statutes, section 290.06, subdivision 2c, paragraph (g).
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Sec. 6. new text begin APPROPRIATION; GENERAL EDUCATION AID.
new text end
new text begin Subdivision 1. new text end
new text begin Department of Education. new text end
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The sums indicated in this section are
appropriated from the general fund to the Department of Education in the fiscal years
designated.
new text end
new text begin Subd. 2. new text end
new text begin Additional general education aid. new text end
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For additional general education aid under
Minnesota Statutes, section 126C.13, subdivision 4:
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2027 new text end |