House Taxes Committee 3/1/18


>>1015 HAS ARRIVED WE WILL CALL THE HOUSE TAX COMMITTEE TO ORDER. WE DO NOT QUITE HAVE A QUORUM BUT WE’LL START OUR MEETING AND WE WILL OFFICIALLY CALL FOR IT WHEN WE HAVE A QUORUM. AS FAR AS I CAN SEE WE WILL GO RIGHT DOWN THE AGENDA. WE HAVE HOUSE BILL 2339 [INAUDIBLE COMMENTS] DRAZKOWSKI AND 486 GAROFALO. SO; WITH THAT; REPRESENTATIVE ROSENTHOL; WELCOME TO THE COMMITTEE. FIRST OF ALL; I WOULD ASK THE QUESTION I ALWAYS ASK; IS IT THERE ANYONE OTHER THAN AT THE FRONT TABLE WISH TO TESTIFY ON BEHALF OF THIS BILL? ANYONE WITH CONCERNS? THE DEPARTMENT LIKE TO TESTIFY ON THE BILL? OKAY; CERTAINLY. SO; WE WILL GO TO THE PROPONENTS. I DON’T SEE ANY OPPONENTS AND GO TO OUR FAVORITE RESOURCE THE DEPARTMENT OF REVENUE. WITH THAT BEING SAID; WHEN WE GET THE BILL; PLEASE PRESENT IT AS AMENDED BECAUSE WHEN WE HAVE A QUORUM WE’LL MOVE THE BILL AND MOVE THE AMENDMENTS TO GET IN THE SHAPE THE AUTHOR WOULD LIKE. WELCOME TO COMMITTEE; SIR.>>THANK YOU MR. CHAIR AND MEMBERS. HOUSE FILE 23 THEREIN ENDOW MINNESOTA WAS CREATED TAX CREDIT OF TWENTY-FIVE PERCENT FOR ENDOWMENT BY COMMUNITY FOUNDATION. THE PURPOSE IS TAKE ADVANTAGE OF THE ONE TIME TRANSFER OF WEALTH THAT OCCURS FROM BABY BOOMERS GIVING TO THE NEXT GENERATION. BASED ON RESEARCH OF MINNESOTA COUNSEL OF FOUNDATION THERE WILL BE A TRANSFER OF ALL MOST $50 BILLION; AND WE WOULD LIKE TO CAPTURE SOME OF THAT AND KEEP IT IN OUR COMMUNITIES TO DO THE GOOD WORK IT IS DOING. TAX CREDIT IS PRIMARILY MODELED ON A SIMILAR CREDIT IN IOWA AND IN PLACE SINCE 2005. THE PROJECT-THE TAX CREDIT CAPTURE 5 PERCENT OF NEARLY 50 BILLION OZ WEALTH RESULT IN 20 MILLION OF NEW ANNUAL GRANT MAKING AND SUPPORT TAX EXEMPT GROUPS AROUND THE STATE. IN ADDITION NORTH DAKOTA; IOWA; WISCONSIN; MARYLAND; IND ANNA AND NUMBER OF OTHER STATES ARE EITHER CURRENTLY DOING THIS; OR IN THE PROCESS OF ENACTING SUCH LAWS. THIS CREDIT WOULD APPLY TO ANNUAL CONTRIBUTIONS OF $100 THOUSAND; SO THE MAXIMUM CREDIT FOR ANY TAXPAYER IS $25 THOUSAND. THE BILL PROPOSES AANICAL CAP OF $4 MILLION IN CREDITS AND INSURE NO SINGLE COMMUNITY FOUNDATION IS ABLE TO BENEFIT MORE THAN OTHERS. ALSO I SHOULD NOTE THE TAX CREDIT WOULD SUNSET IN 2032. IT IS ESTIMATED 27 FOUNDATIONS WILL BE ELIGIBLE TO PARTICIPATE IN THE ENDOW MINNESOTA PROGRAM; MOST COMMONLY KNOWN FOUNDATIONS HAVE AFFILIATES; SUBSIDIARIES THAT SERVE OTHER COMMITTEES. TAKEN AS A QUHOLE RECOLLECT MINNESOTA NETWORK OF COMMUNITY FOUNDATIONS REACH OUT THROUGH THE ENTIRE STATE. THAT IS REALLY WHY I BROUGHT THIS BILL BECAUSE IT WILL DO REALLY GREAT THINGS FOR RURAL MINNESOTA AS WELL AS THE REST OF THE STATE. HERE TO TESTIFY TODAY IS CHRIS FULTON; EXECUTIVE DIRECTOR OF GRAND RAP IDCOMMUNITY FOUNDATION.>>WE HAVE A QUAUR. CALL THE HOUSE TAX COMMITTEE TAORDER. REPRESENTATIVE SCHULTZ MOVES MINUTES OF FEBRUARY 28. ANY ADDITION OR CORRECTION SNZ HEARING NONE; SAY AYE. OPPOSED? MOTION PREVAILS. THANK YOU MEMBERS. THANK YOU REPRESENTATIVE SCHULTZ. ITEM NEXT MARQUART MOVES HOUSE FILE 2349. H2339A1. ANY DISOUNGZ THE AMENDMENT? ALL IN FAVOR SAY AYE. OPPOSED? MOTION PREVAILS WE NOW HAVE THE BILL BEFORE US AS AMENDED. ANYONE IN THE AUDIENCE WHO WISH TO TESTIFY WITH CONCERNS ABOUT THIS BILL? OKAY. SO; PLEASE STATE YOUR NAME AND WHO YOU REPRESENT?>>CHRIS FULTON; EXECUTIVE DIRECTOR OF GRAND RAPIDS COMMUNITY FOUNDATION. THANK YOU FOR THIS OPPORTUNITY TO TALK TO THIS EXITY ABOUT OUR COMMUNITY FOUNDATION AND POTENTIAL FOR THIS LEGISLATION CALLED ENDOW MINNESOTA. I LIKE TO START ON COMMUNITY FOUNDATIONS IN GENERAL AND THAT WILL LEAD INTO ADDITIONAL INFORMATION ABOUT THE IMPACT OF THIS LEGISLATION. COMMUNITY FOUNDATIONS AND NOT KNOWING WHAT THE BACKGROUND IS ORPHTHE COMMITTEE MEMBERS EXIST TO PROMOTE FLANTHOPY; SUPPORT DONOR CHOICE AND TO GROW AND SUPPORT NON-PROFIT COMMUNITIES. WE ARE PUBLIC CHARITIES; SO WE SUPPORT PUBLIC GIVING TO CREATE COMMUNITY GOOD. THE PUBLIC ASPECT IS THAT IS A VE RY IMPORTANT ASPECT OF IT. YOU HEAR ABOUT BUSH AND [INAUDIBLE COMMENTS] ALL THESE PRIVATE FOUNDATIONS BUT WE ARE THE COMMUNITY FOUNDATION. OUR PHILANTHPIST ARE COMMUNITY MEMBERS AT LARGE. COMMUNITY FOUNDATIONS ARE DEFINED BY GEOGRAPHY SO FOR ME UMIN NORTH CENTRAL MINNESOTA THE GREATER ITAS CUAREA [INAUDIBLE COMMENTS] DEFINES WHO WE ARE AND THE IMPORTANT POINT IS THE OPPONENT THAT ALL OF MINNESOTA IS COVERED BY A COMMUNITY FOUNDATION THAT MEETS THE STIPULATIONS TO BE QUALIFIED UNDER THIS LEGISLATION. IMPORTANTLY; THE HISTORIC MODEL BUSINESS MODEL OF COMMUNITY FOUNDATION IS BUILD ENDOWMENT FOR LONG TERM BETTERMENT OF COMMUNITIES. SPEAKING FOR OUR COMMUNITY FOUNDATION; WE MANAGE 137 DIFFERENT ENDOWMENTS. EACH ENDOWMENT TAKES A LITTLE DIFFERENT FORM; SOME OF THE ENDOWMENTS ARE DESIGNED AND MANAGE FOR SPECIFIC PURPOSES INSIDE THE COMMUNITY. THANKFULLY SOME ARE DESIGNED AND MANAGED TO BE UNRESTRICTED TO MEET NEEDS BUT 137 ENDOWMENTS MAKES US THE PREMIER MANAGER OF ENDOWMENTS IN UPPER CENTRAL MINNESOTA WHICH IS A UNIQUE PLACE TO BE. AS TWO TYPES OF ENDOWMENTS I WOULD REALLY LIKE TO RESPOND TIME WITH; I THINK THIS IS THE POWER OF THIS PIECE OF LEGISLATION COMES IN. THE FIRST ARE THINGS CALL AGENCY FUNDS. VERY SIMPLY AGENCY FUNDS ARE ENDOWMENT FOR NON-PROFIT ORGANIZATIONS. WE MANAGE 47 DIFFERENT AGENCY FUNDS IN THE GRAND RAPIDS AREA AND GREATER ITAS CUAREA. HE’S THE IMPORTANCE OF AGENCY FUNDS [INAUDIBLE COMMENTS] HOSPITAL-I KBOE THROUGH THE LIST OF THE LARGER NON-PROFIT ORGANIZATIONS IN THE TOWN; ALL ENDOWMENTS ARE UNDER OUR MANAGEMENT; BUT THE MANAGEMENT OF THOSE ENDOWMENTS ALONG WITH OUR PROCESSES FOR GENERAL GRANTING FOR NON-PROFITS PUT THIS IN A UNIQUE POSITION AND CREATES A UNIQUE RELATIONSHIP BETWEEN WHAT WE DO AND WHAT NON-PROFITS DO AND I TELL YOU PRNL EXPERIENCE; IT IS A VERY STRONG RELATIONSHIP. THERE IS NOT A SINGLE NON-PROFIT I CAN’T CALL OUT AND SPEAK TO THE DIRECTOR ON A PERSONAL BASIS. SO THAT IS A VERY IMPORTANT THING. THIS PARTICULAR LEGISLATION REALLY CONNECTS-IT MAKES IT EASIER FOR NON-PROFITS TO RAISE FUNDS FOR THEIR ENDOWMENTS. IT ISN’T EASY TO RAISE MONEY FOR ENDOWMENTS; THAT’S COMING FROM MY SHORT EXPERIENCE IN THIS NON-PROFIT WORLD. IF THEY HAVE A TOOL AND INNOCENTIVE TO BE ABLE IT DOTHAT IT IS A VERY VERY POWERFUL THING AND AGAIN; 47 OF THE LARGER AGENCIES UP IN OUR AREA HAVE ENDOWMENTS THAT FALL UNDER US. THE SECOND THING I LIKE TO TALK ABOUT ARE OUR COMMUNITY FUNDS AND WE ALL HAVE COMMUNITY FUNDS. THEY ARE SPREAD OUT ACROSS THE STATE. WE HAVE 5 OF THEM. I TALKED ABOUT 1; IT IS [INAUDIBLE COMMENTS] MY FAVORITE STORY; A LONG STORY BUT I’LL KEEP IT SHORT. I AM GOING SAY THAT WHEN 80 YEAR OLD [INAUDIBLE COMMENTS] STARTED THE COMMUNITY FUND BACK IN 2000 SHE COULD NEVER IMAGINED AT THE END OF 20171156 GIFTS COME INTO HAD FUND TOTALING $690 THOUSAND. 105 GRANTS WOULD HAVE GONE OUT OF THIS FUND TOTALING $180 THOUSAND IN THE CURRENT VALUE OF THATFUND IT IS NOW OVER $730 THOUSAND. MIRIAM WOULD BE FLABBERGASTED ABOUT THAT IN NASHUA ON THE IRON RANGE. THIS NEEX THE COMMITTEE MAKE THE DECISION ON GRANTS ARE GOING TO GET ABOUT $30 THOUSAND TO APPLY AGAINST CHARITABLE NON-PROFIT NEEDS. THAT IS A SIGNIFICANT THING FOR NASHUA. THERE ARE TWO PIECES OF THAT AND IT GETS TO TRANSFER OF WEALTH. IN ITASCACOUNTY THE NUMBER IS PROJECTED $530 MILLION. IF WE COULD CAPTURE A PERCENTAGE OF IT THROUGH A INCENTIVE THINK OF THE POWER. 5 PERCENT IS ABOUT $25 MILLION THAT STALE IN THE AREA TO DO COMMUNITY GOOD. THE COMMUNITY FUND PROVIDES THE MEANS FOR SOMEONE TO LEAVE A GIFT FOR THEIR COMMUNITY. IT IS VERY HARD TO DO THAT IF YOU DONT HAVE SOMETHING LIKE A COMMUNITY FUND. WHAT HAPPENS UP IN NASHUA; IS THEY DON’T [INAUDIBLE COMMENTS] GRADUATE FROM HIGH SCHOOL AND THEY HAVE TO LEAVE. CHANCES ARE BETTER THAN NOT THEY WILL NEVER COME BACK. THE GENERATIONAL TRANSFER OF WEALTH WHAT HAPPENS IN THE COMMUNITY I SERVE IS A OUTWARD FLOW SO MONEY THAT IS HARD EARNED IN THE MINES AND WOODS AND LOCAL BUSINESSES LEAVES THESE COMMUNITIES FOREVER HAVING A INCENTIVE AND TOOL TO KEEP SOME OF THAT MONEY IN OUR COMMUNITIES IS VERY VALUABLE AND KEEP A LOT OF THESE COMMUNITIES VIBRANT INSTEAD OF NOT SO VIBRANT. I APPRECIATE THE ABILITY TO COME AND TALK TO YOU AND WILL PASS IT OFF TO MY COLLEAGUES.>>CHAIR: STATE YOUR NAME AND WHO YOU REPRESENT FOR THE RECORD.>>GOOD MORNING MR. CHAIR; MEMBERS OF COMMITTEE; STEVE JEWEL PRESIDENT AND CEO OF COMMUNITY GIVING.>>CHAIR: WELCOME TO COMMITTEE.>>THANK YOU; COMMUNITY GIVING A EMBRULA ORGANIZATION WHERE WE EMPOWER AND SUPPORT IN BRAINERD LAKES; ST. CLOUD AND NUMBER OF OTHER COMMUNITIES BETWEEN. I GREW UP IN JACKSON MINNESOTA IN SOUTHERN PART THE STATE AND LIVED IN THE NORTHERN PART THE STATE AND PAST 20 YEARS IN GRAITDER ST. CLOUD AND BEEN WORKING IN THE FIELD OF COMMUNITY FOUNDATION ALL MOST 30 YEARS AND WHAT I HAVE TO SAY TALKING ABOUT COMMUNITY FOUNDATION IN GENERAL IS I HOPE YOU THINK ABOUT COMMUNITY FOUNDATIONS AS INSTITUTIONS; INSTITUTIONS THAT ARE A VIBRANT PART OF THE COMMUNITYS THEY SERVE. BECAUSE THEY HAVEN’T ALWAYS BEEN SEEN THAT WAY BUT INCREASINGLY BECOMING THAT. WANT TO TELL THE STORY ABOUT [INAUDIBLE COMMENTS] AND HUSBAND DOCK HAD NO CHILDREN AND NOT SURE WHAT TO DO WITH THE ESTATE BUT DISCOVERED THRFS A COMMUNITY FOUNDATION IN ST. DLOUD BECAUSE THERE WASN’T ONE IN WILMER YET AND TALKED HOW THEY CAN STRUCTURE THEIR ESTATE. AFTER SHE PASSED AWAY THE COMMUNITY RECEIVED A $400 THOUSAND GIFT THAT PAYS INCOME TO 6 DIFFERENT CHARITIES TO PERPETUITY TO ENABLE TO SUPPORT WONDERFUL CAUSES. WHAT THAT TRIGGERED WAS A GROUP IN WILMER TO TALK ABOUT THEM HAVING A COMMUNITY FOUNDATION AND THEY CREATED THIS COMMUNITY FOUNDATION BACK IN 1998 AND THIS PAST YEAR THEY COLLECTIVELY RAISED $1998 AND THIS PAST YEAR THEY COLLECTIVELY RAISED OVER A MILLION; THE WILMER FOUNDATION DID AND THEY BROUGHT TOGETHER 3;000 VOLUNTEERS IN THEIR COMMUNITY TO REVITALIZE THE ROBINS ISLAND PARK CREATING A FULLY ACCESSIBLE PLAYGROUND FOR THEIR COMMUNITY. PRIVATE MONEY THAT CAME IN ENGAGING THE RESIDENTS OF THE COMMUNITY; CREATING BONDING BETWEEN THOSE PEOPLE AND CREATING A INCREDIBLE NEW PARK TO REVISALIZE ROBINS ISLAND. MANY THINK OF COMMUNITY FOUNDATION AND WONDER HOW THEY ARE DIFFERENT FROM LOCAL UNITED WAY. THE UNITED WAY IS A COMMUNITY CHECKING ACCOUNT; MUNLY COMES IN AND GOES OUT. COMMUNITY FOUNDATIONS ARE A COMMUNITIES SAVING ACCOUNT. WE HAVE INCENTIVE IN PLACE TO ENCOURAGE US TO SAVE FOR RETIREMENT. WE HAVE INCENTIVES IN PLACE TO ENCOURAGE US TO SAVE FOR OUR CHILDRENS EDUCATION AND WHAT WE ARE ASKING YOU IS TO THINK ABOUT INCENTIVES FOR COMMUNITIES TO SAVE FOR THEIR FUTURE AND ENABLE PRIVATE MONEY TO BE ABLE TO MAKE A DIFFERENCE IN THOSE LOCAL COMMUNITIES LONG INTO THE THE FUTURE AND WE HAVE THIS BRIEF WINDOW OF TIME WITH THIS INTERGENERATIONAL TRANSFER OF WEALTH. GROWING UP IN A SMALL DOWN IN SOUTHERN MINNESOTA WHERE WATCHED WHAT HAPPENED TO MY HOME TOWN AS SMALL BUSINESSERIZE NOT AS PRESENT ON MAIN STREET AS THEY USED TO BE. MY FATHER WAS ONE OF THOSE BUSINESSES AND SO THAT INTER-GENERATIONAL TRANSFER OF WEALTH CAPTURING THAT IS WHAT COMMUNITY FOUNDATIONS ARE ABOUT AND WHY WE ARE HERE TODAY. THANK YOU.>>CHAIR: STATE YOUR NAME AND WHO YOU REPRESENT.>>MR. CHAIR; MEMBERS; JEREMY WELLS SERVE AS PHILANTHROPIC FOUNDATION IN ST. PAUL. I’M PLEASED TO SPEAK ON THE BEHALF-OF ENDOWMENT SIVL LEGISLATION. I GREW UP IN CENTRAL MINNESOTA AND PROUD TO BE FROM MINNESOTA SINCE 2004 QUH I MOVED MY CHILDREN AND MYSELF HERE. I SPNT MY CAREER IN THE FUNDRAISING PROFESSION AND SERVE ON THE BOARD OF JAMES TOWN AND SEE THE IMPACT OF NORTH DAKOTA TAX CREDIT. I I’M FROM AND PARENT LIVE AND DID UNDERGRADUATE WORK. TODAY I REPRESENT THE ST. PAUL-THE ST. PAUL FOUNDATION IS THE LARGEST IN THE STATE AS WELL AS THE MINNESOTA WHICH SERVES THE STATE. THE ONLY IN MINNESOTA. AS CHRIS MENTIONED WE ALSORUPT 17 COMMUNITY FUNDS. THESE LOCK AND FEEL VERY MUCH LIKE COMMUNITY FOUNDATION JUST SCATTERED AROUND THE STATE SO WE HAVE 17 COMMUNITIES DOING INCREDIBLE WORK THROUGH THE RELATIONSHIP WE HAVE AND PROVIDE ALL THE BACKSTOPPING AND UVSS GIVE THEM ACCESS TO INVESTMENT AND RETURNS THEYED CANANT GET ON THEIR OWN AND GIVE THEM THE INFRASTRUCTURE TO MAKE SURE THEIR PRIORITY CARE FRG THE COMMUNITY NOT HOW TO MANAGE RESOURCES. WE SUPERCOMMUNITY FUNDS IN CHIZM AND ALBERT LEE AND FAIRMONT AND WAW CECA AND COMMUNITIES THROUGHOUT THE STATE. WE SERVE ALL MINNESOTA. LAST YEAR BETWEEN OUR COMMUNITY AND NETWORK OF FOUNDATIONS WE GRANTED ALL MOERFB A HUNDRED MILLION INTO NON-PROFITS AROUND THE STATE OF MINNESOTA IMPT 36 PERCENT OF THE GRANTS THAT WERE MADE FROM THE DONOR FUND WENT OUTSIDE THE 7 METRO COUNTY AREA OUT TO GREATER MINNESOTA. NOT ONLY THE RELATIONSHIPS WE HAVE DOWNER THAT LIVE HERE AND APPRECIATE THE ABILITY TO GIVE TO THEIR HOME TOWN WHETHER IN BENISON MINNESOTA OR UP ON THE RIREN RANGE OR WHEREVER IT HAPPENS TO BE WE HAVE DONORS WITH CONNECTIONS. WE [INAUDIBLE COMMENTS] WE DO HAVE THIS REACH OUT TO GREATER MINNESOTA. WE ALSO MANAGE NON-PROFIT ENDOWMENT FUNDS OR AGENCY FUND SO MANY NON-PROFITS ARE IN A POSITION WHERE THEY BENEFIT FROM SOME LONG-TERM CHARITABLE CAPITAL BUT THERE IS NO–THAT CAPITAL IS DIFFICULT TO RAISE. NON-PROFITS BIG AND SMALL SOME AS LOW AS $25 THOUSAND OTHERS INTO THE MILLIONS OF DOLLARS AND THAT IS A WAY WE BENEFIT THE NON-PROFITS IN THE COMMUNITY. THE LAST THING I WANT TO SAY IS THAT ONE THING I HEARD GROWING UP; ONE THING I EXPERIENCED SINCE IN MINNESOTA; MINNESOTA IS BUILT ON STRONG TRADITION OF GIVING ON THE INDIVIDUAL SIDE CERTAINLY ON THE CORPORATE SIDE AND FOUNDATION SIDE. I SERVE ON A INTERNATIONAL BOARD WITH COLLEAGUES AROUND THE COUNTRY AND INTERNATIONALLY EVERYONE IS INVS OF MINNESOTA AND SAY YOU REALLY GOT THIS PHILANTHROPY THING FIGURED OUT. PEOPLE ARE GENEROUS AND GIVING. WE HAVE DONE A WONDERFUL JOB AND THINK THROUGH THE LEGISLATION THE INCENTIVE TO SAVE FOR IT COMMUNITY FUTURE WE HAVE A OPPORTUNITY TO AGAIN BE A LEADER AS WELL AS SOME OF OUR PEER STATES HAVE DONE OPPOSE TODAY WAITING FOR MORE AND MORE STATES TO GET AHEAD OF THE CURVE AND MISSING ON SOME OF THE IMPORTANT NENERATIONAL TRANSFER OF WELTD SO APPRECIATE THE OPPORTUNITY MR. CHAIR AND MEMBERS OF #C34I9Y TO TESTIFY ON BEHALF OF THIS.>>CHAIR: [INAUDIBLE COMMENTS]>>I AM A JIMMY.>>CHAIR: [INAUDIBLE COMMENTS] QUESTIONS FOR MEMBERS? REPRESENTATIVE HERTAUS: I HAVE A COUPLE QUESTIONS; ONE FOR MR. MICHAEL AND ONE FOR REPRESENTATIVE ROSENTHOL. I THINK I HEARD IT BUT LIKE YOU TO VALIDATE; PEOPLE WHO KNIV CAN IMPOSE A COVENANT SO IT IS USED IN CONFORMANCE WITH A PURPOSE OR CAUSE THEY WOULD SUPPORT AND NOT USED FOR SOMETHING THEY DON’T?>>REPRESENTATIVE ROSENTHOL: THAT IS MY UNDERSTANDING.>>THANK YOU MR. CHAIR. THE OTHER QUESTION IS THEY CAN GIVE THIS GIFT WHILE LIVING AS WELL AS A MATTER OF AN ESTATE ISSUE?>>REPRESENTATIVE: THAT’S CORRECT.>>IT IS A INNOVATIVE IDEA. MY QUECKZ TO MR. MICHAELS IS; THIS IMPOSES THE OPPORTUNITY TO USE A CREDIT WHICH IS MUCH MORE POWERFUL THAN A DEDUCTION AND WONDERING WHAT OTHER TOOLS PEOPLE HAVE AT PRESENT TO GIVE-ARE THERE CREDITS AVAILABLE UNDER CURRENT LAW YOU ARE AWARE OF OR IS IT STRICTLY LIMIT TODAY DEDUCTION WHICH HAS THE BENEFIT OF THE MARGEMAL TAXERALTY?>>MR. MICHAEL: MR. CHAIRMAN; REPRESENTATIVE HERTAUS; MINNESOTA HAS A VARIETY OF TAX CREDITS BUT NONE FOR CHARITABLE CONTRIBUTIONS; SO MANY OTHER STATES DO HAVE AS THE TESTIFIERS INDICATED A VARIETY OF DIFFERENT CREDITS FOR CHARITABLE CONTRIBUTIONS AND THERE HAVE BEEN PROPOSALS IN THE PAST IN MINNESOTA FOR A SPECIFIC THINGS THAT SO FAR NONE ENACTED.>>REPRESENTATIVE HERTAUS: THANK YOU; MR. CHAIR.>>REPRESENTATIVE CARLSON: MR. CHAIRMAN; A INTERESTING CONCEPT; BUT TRYING TO GET MY HEAD AROUND WHAT WE MEAN BY COMMUNITY. ONE OF THE TESTIFIERS REFERENCED CENTRAL MINNESOTA; THE BRAINERD LAKES AREA AND THERE YOU HAVE BRAINERD COMMUNITY TECHNICAL COLLEGE. I ASSUME BECAUSE I THINK VIRTUALLY ALL OUR COLLEGES I UNIVERSITIES HAVE A FOUNDATION; SO IF A RESIDENT OF THE BRAINERD AREA CHOSE TO EXERCISE THIS BY MAKING A CONTRIBUTION THE THE FOUNDATION AT A TECHNICAL COMMUNITY COLLEGE IS THAT ELIGIBLE I DON’T KNOW IF THAT IS QUESTION OF YOU OR STAFF; BUT JUST YOU KNOW; THE WORDS COMMUNITY COULD BE INTERPRETED A COUPLE DIFFERENT WAYS AND THERE IS REFERENCE TO VARIOUS STATUTES AND DON’T KNOW IF A HIGHER ED INSTITUTION OR SCHOOL DESTRICATE-I’M RETIRED TEACHER AND THE SCHOOL DISTRICT AND WORKED FOR HAD A FOUNDATION AND THAT WAS A K-12 DISTRICT SO IF SOMEBODY CAN COMMENT ON HOW LIMITED OR HOW BROAD THIS PARTICULAR LANGUAGE IS.>>MR. MICHAEL OR MR. [INAUDIBLE COMMENTS]>>MR. CHAIRMAN; REPRESENTATIVE CARLSON. THE DEFINITION OF THE KIND OF COMMUNITY FOUNDATION THAT QUALIFY REQUIRES THEM TO SUPPORT BROAD-BASED CHARITABLE INTEREST AND IN THE BILL IT IS IN THE DEFINITION OF IN PARAGRAPH D; I THINK THIS WOULD NOT BE INTENDED FOR A FOUNDATION OR A CHARITABLE ENTITY THAT SUPPORTS A VERY SPECIFIC OR NARROW KIND OF THING; BUT THE TESTIFIERS CAN OBVIOUSLY TALK MORE BROADLY TO WHAT THEIR INTENT IS; BUT TO ME IT APPEARS IT HAS TO BE MUCH MORE BROAD BASED THEN SOMETHING FOR ONE EDUCATIONAL ORGANIZATION.>>STATE YOUR NAME.>>STEVE JEWEL; COMMUNITY GIVING AND WE ADMINISTRATE AND WORK WITH THE BRAINERD LAKES AREA COMMUNITY FOUNDATION XISKLY AND IN THE CASE OF BRAINERD LAKES AREA; A DONOR COULD VERY EASILY MAKE A GIFT DESIGNATED THE END BENEFICIARY OFF THE INCOME STREAM TO BE THE TECHNICAL AND COMMUNITY COLLEGE IN THE BRAINERD AREA AND SO COULD THE SCOOM. THE BRAINERD SCHOOL DISTRICT HAS A ENDOWMENT FUND ALREADY ADMINISTERED AND PARTNER WITH THE BRAINERD LAKES COMMUNITY FOUNDATION SO IT IS A WAY COMMUNITY FOUNDATIONS PARTNER WITH EDUCATIONAL INSTITUTIONS OR NON-PROFIT TO ENABLE PEOPLE TO MAKE GIFTS TO WHERE EVER THEIR PASSIONS LIE AND WANT TO MAKE A DIFFERENCE.>>REPRESENTATIVE CHARL SON: IN EENS ESSENCE THERE IS A PASS THROUGH IF THERE WAS A NEED AT BRAINERD COMMUNITY TECHNICAL COLLEGE-JUST USING THAT AS A EXAMPLE BECAUSE YOU ARE AT THE TABLE; BUT WHEN WE SAY CHARITABLE I KNOW SOME OF THE FOUNDATIONS ON THE COLLEGE CAMPUSES HELPED STUDENTS IN A VARIETY OF WAYS. TYPICALLY YOU THINK SCHOLARSHIPS; BUT SOMETIMES IT MIGHT BE AN EMERGENCY SITUATION; A BATTERY FOR A AUTOMOBILE OR NEW TIRE AND THAT IS VITAL FOR THEM TO BE ABLE TO COMMUTE SO I DEFINE A LOT OF THE USAGES AS CHARITABLE IN THE BROADEST SENSE. I UNDERSTAND WHAT YOU’RE SAYING IF YOU WANTED TO GIVE TO BRAINERD COMMUNITY COLLEGE EXERCISING THIS IF YOU GAVE TO THE BRAINERD COMMUNITY FOUNDATION YOU WOULD TUT A PIE ON THAT BUT THAT IS WHERE IT GOES SO THAT ANSWERS MY QUESTION MR. CHAIRMAN. THANK YOU.>>CHAIR: THE ENDOWMENT FOR THE JAMES TOWN JIMMIES IS $36.1 MILLION.>>CHAIR MARQUART: THANK YOU MR. CHAIR AND THANK YOU REPRESENTATIVE ROSENTHOL BRINGING THIS FORWARD. A QUESTION FOR ONE OF THE TESTIFIERS WITH THE NEW FEDERAL TAX LAW AND THE INCREASE IN THE STANDARD DEDUCTION; THERE WILL BE LESS ITEMIZES; AND SO I GUESS HAVE YOU LOOKED AT AND PROBABLY WOULDN’T EFFECT THE BIG DONORS BUT INSMALLER DONORS HAVE YOU LOOKED AT WHAT IMPACT THAT MAY HAVE ON YOUR CONTRIBUTIONS BECAUSE OF THE CHARITABLE GIVING?>>THANK YOU REPRESENTATIVE MARQUART. WE HAVE LOOKED AT THAT. WE LOOK AT IT VERY CLOSELY. YOU ARE RIGHT FOR THE LARGEST DONORS THE ANTICIPATEATION BASED OTHEN STUDY BY THE LILY SCHOOL OF PHILANTHROPY IS THE NUMBER OF ITEMERS DROP TO MAYBE AS LOW AS 5 AND 11 PERCENT. WE ARE HEARING FROM A LOT OF INDIVIDUAL DONOR JZ PROFESSIONAL ADVISORS ENCOURAGING THE CLIENTS TO BUCKET OR CLUSTER THEIR CONTRIBUTIONS. MAYBE MAKE THREE TIMES THE AMOUNT IN ONE YEAR AND TAKE THE STANDARD DEDUCTION THE FOLLOWING TWO YEARS; SO THEY WILL LIKELY STILL GIVE AT INCREASING LEVELS; THEY MIGHT JUST DO IT DIFFERENTLY BASED OW THE TAX CODE IS WRITTEN IN FEDERAL TAX LAW. NONE KNOW PROBABLY THE MOST APPROPRIATE ANSWER BUT WE ARE WORK WG NON-PROFITS AND OUR DONORS TO HELP IDENTIFY THE BEST STRAT AGENCIES UNDER THE TAX LAW TO ENCOURAGE PHILANTHROPY. THIS COULD BE A EXTREME INCENTIVE FOR THOSE PEOPLE CHOOSING NOT TO ITEMIZE BECAUSE MAYBE THEY WERE IN THE BRACKET ON THE EDGE AND MIGHT NOT MAKE SENSE AND TAKE THE DOUBLING OF THE STANDARD DEDUCTION INSTEAD.>>REPRESENTATIVE MARQUART: THIS IS PROBABLY A AREA WE WILL HAVE TO LOOK AT AS WE CONSIDER THE CONFORMITY AND ALL. THANK YOU VERY MUCH.>>REPRESENTATIVE PETERSBURG: THANK YOU MR. CHAIR AND I’M INTERESTED ON PAGE 4 WHERE IT TALKS ABOUT THE LIMIT ON THE AMOUNT OF TAX CREDITS THE COMMISSIONER CAN GIVE OUT. WHAT HAPPENS IF THE TOTAL CONTRIBUTION CREDIT SAID TOTAL OVER $4 MILLION; HOW DO THEY DETERMINE WHO IS NOT GOING GET IT OR IS IT PRO RATED; IS THERE THOUGHT ABOUT THAT? CURIOUS.>>REPRESENTATIVE ROSENTHOL:>>MR. MICHAEL: MR. CHAIRMAN; YES THE MECHANISM IN THE BILL IS A FIRST COME FIRST COME SERVE ALLOCATION; BUT THERE ARE LIMITS ON-THERE ARE MAXIMUMS ON THE AMOUNT ANY ONE TAXPAYER CAN GET AND ANY ONE ORGANIZATION CAN GET AND THE WAY THE MECHANISM WORKS IS THE CONTRIBUTOR APPLIES TO DEPARTMENT OF RESERVE NEW TO GET A CERTIFICATION AND THEY HAVE 60 DAYS TO MAKE THEIR CONTRIBUTION AND IF THEY FAIL TO MAKE IT WITHIN THE 60 DAY WINDOW THEIR CERTIFICATION EXPIRES AND IT IS AVAILABLE TO SOMEONE ELSE TO MAKE A CONTRIBUTION.>>CHAIR: MR. WELLS.>>MR. WELLS: I BELIEVE THERE IS A 8 MONTH HOLD BACK ON THE CREDITS TO ENCOURAGE FOR SMALLER DONERS AS WELL SO NOT A BUNCH OF INDIVIDUALS WITH $100 THOUSAND CONTRIBUTIONS AND TAKING THE MU KWLORFT CRED TD CHBLT THESE $8 MONTH HOLD BACK ON THE CREDITS TO ENCOURAGE FOR SMALLER DONERS AS WELL SO NOT A BUNCH OF INDIVIDUALS WITH $100 THOUSAND CONTRIBUTIONS AND TAKING THE MU KWLORFT CRED TD CHBLT THESE ARE CONTRIBUTIONS ORPH30 THOUSAND OR LEZ SO IT INTENDED TO ENCOURAGE PHILANTHROPY AT ALL LEVELS NOT JUST THE HIGHEST LEVEL.>>REPRESENTATIVE PETERSBURG.>>REPRESENTATIVE LOCKLER: THANK YOU MR. CHAIR AND I THINK IT IS INTERESTING IDEA AND TO ME THE QUESTION IS; SINCE WE KNOW THAT WITH THE FEDERAL TAX CHANGES OUR CORPORATION JZ BUSINESSES HAVE GOTTEN MORE TAX RELIEF AND TAX CUTS THAN ANYONE ELSE AND INDIVIDUALS DEPENDING WHERE THE FAMILY CIRCUMSTANCES ARE PAYING MORE. I WONDER WHY WOULDN’T TARGET DONATIONS FROM INDIVIDUALS RATHER THAN BROADENING TO ANY ENTITY THAT PAY TAXES AND ALL YOUR STOR AS ARE ABOUT INDIVIDUAL JZ UNDERSTAND THE INTEREST BUT SEEMATHIZE CORPORATE AND OTHER INCENTIVES ARE THERE IN OTHER WAYS TO HAVE TAX RELIEF AND THE CONNECTION IS MORE OF A INDIVIDUAL TO THEIR COMMUNITY. YOU MIGHT ADDRESS THAT.>>MR. JEWEL: MR. CHAIR; REPRESENTATIVE LOCKLER; AS A COMMUNITY FOUNDATION WE SUPPORT THIS BILL AND THINK IT WILL BE A GREAT INCENTIVE; BUT IT MAY NEED CHANGES. WE WORK WITH INDIVIDUALS AND WE ALSO LIKE TO SAY YOU DONT HAVE TO BE A MULTIMILLIONAIRE TO BE A PHILANTHPIST. WE WATCH TOOCHERS AND PEOPLE FROM ALL MEANS AND BACK GROUNDS SET UP ENDOWMENTS FOR THE BENEFIT OF THE COMMUNITY. I KNOW OUR COMMUNITY FOUNDATION WE ARE NOT BEHOLDEN IT BE SPECIFICALLY FOR CORPORATIONS AND IF THIS BENEFITS AND GET THIS PASSED BECAUSE WE FOCUS ON INDIVIDUALS; WE ARE ALL FOR IT. I AGREE WITH YOU; WE IJLARGE PART WORK WITH INDIVIDUAL JZ NOT CORPORATE ENTITIES FOR THE MOST PART. OUR FOCUS IS ON INDIVIDUAL. WE DO PARTNERSHIPS WITH CORPORATE GIVING BUT THE FOCUS IN LARGE PART IS 90 PERCENT IS INDIVIDUALS.>>REPRESENTATIVE LOCKLER: THANK YOU MR. CHAIR AND OUTSIDE OF THIS I WILL FOLLOW UP BECAUSE ABOUT THE ACCOUNTABILITY OF THE COMMUNITY FOUNDATIONS AND THE OVERSIGHT BECAUSE IN MY COMMUNITY I KNOW ONE PERSON WHO WAS A CLARICAL WORKER STARTED WITH A COMPANY THAT BECAME BIG; HUGE; WAS PAID WITH STOCK HOLDINGS WHEN THEY COULDN’T MAKE PAY ROLL AT THE BEGINNING AND THIS PERSON WAS THEY DIED LEFT OVER $20 MILLION ENDOWMENT TO A PARTICULAR FOUNDATION; WHICH THEN SPENT IT OUTSIDE OF THE COMMUNITY IN WHICH SHE SPENT HER ENTIRE LIFE AND KNOW MANY PEOPLE WHO KNEW THE PERSON WAS WERE SURPRISED AT THE CHOICES MADE SO WE NEED TO MAKE SURE WE HAVE THE OVERSIGHT AND THE INTENTION THE DONOR IS MET PARTICULARLY IF WE ARE GIVING TAX INCENTIVES AND ENCOURAGING MORE AND MORE INDIVIDUALS TO STEP UP.>>CHAIR ANDERSON: THANK YOU MR. CHAIR. THIS IS FOR REPRESENTATIVE ROSENTHOL. LOOKING OVER THIS I GET THE IMPRESSION THAT YOU VIEW TAX CREDITS AS SOMETHING TO CHANGE INDIVIDUAL BEHAVIOR; IS THAT THE CASE WITH THIS BILL YOU ARE LOOKING TO DO OR AT LEAST INFLUENCE BEHAVIOR.>>THANK YOU MR. CHAIR AND REPRESENTATIVE ANDERSON; THIS GENERATIONAL WEALTH IS A ONE TIME OPPORTUNITY AND WE ARE LOOKING AT THE BESTWAY TO CAPTURE AS MUCH OF THIS MONEY TO KEEP IN OUR COMMUNITY AS POSSIBLE AND WE CAME UP WITH THE IDEA OF A TAX CREDIT WOULD BE THE MOST VALUABLE TOOL TO GET THE MOST MONEY FOR THESE FOUNDATIONS.>>CHAIR ANDERSON:>>CHAIR DAVNIE: THANK YOU MR. CHAIR. ARE THERE LIMITATIONS ON THE PURPOSES OF DONATIONS TO COMMUNITY FOUNDATIONS UNDER MINNESOTA STATUTE?>>MR. WELLS: REPRESENTATIVE; CURRENTLY ARE YOU ASKING ABOUT THIS BILL?>>CURRENTLY.>>MR. WELLS: SO; IF SOMEONE MAKES A CONTRIBUTION TO A COMMUNITY FOUNDATION THEY CAN SET UP FOR A SPECIFIC PURPOSE REGARDLESS. IT COULD BE-I COULD SET UP AT THE ST. PAUL FOUNDATION TO BENEFIT [INAUDIBLE COMMENTS] THIS BILL IS RESTRICTED OF BENEFITING MINNESOTA COMMUNITIES. THAT TYPE OF ENDOWMENT ISN’T ELIGIBLE FOR THIS TYPE TAX CREDIT.>>CHAIR DAVNIE: MR. CHAIR; THANK YOU. ANYTHING THAT I AS THE DONOR DEEM TO BE TO THE BENEFIT OF THE COMMUNITY IS ELIGIBLE?>>MR. WELLS: REPRESENTATIVE DAVNIE; AS LONG IT REPRESENTS A CHARITABLE PURPOSE WE COULDN’T GRANT TO FOR PROFIT ORGANIZATIONS DOING IMPORTANT WORK THERE BECAUSE THAT IS OUT IST THE AUSPICE OF GRANTS COMING OUT OF COMMUNITY FOUNDATION BUT IT COULD BE EDUCATION; FIRE; HEALTHCARE; JOBS.>>REPRESENTATIVE SCHULTZ: THANK YOU MR. CHAIR. JUST WANT TO THANK REPRESENTATIVE ROSIN THOLE FOR CARRYING THIS BILL. I’M WORRIED ABOUT THE TAX IMPLICATION OF THE NEW TAX BILL AND HOW THAT WILL EFFECT CHARITABLE DONATIONS. I HAVE ONE QUESTION; HOW DID YOU LAND ON THE $300 THOUSAND LIMIT FOR DONATION OF $30 THOUSAND OR LESS TO BE SET ASIDE AND WHY $300 THOUSAND; WHY NOT A GREATER AMOUNT?>>REPRESENTATIVE ROSENTHOL: MR. CHAIR; REPRESENTATIVE SCHULTZ; IT IS A NUMBER THAT WE FELT WAS A GOOD PLACE TO START. DOESN’T HAVE TO STAY THERE; IT COULD MOVE BUT WE WANTED TO MAKE SURE THE SMALL DONORS DID HAVE ACCESS TO PARTS THE FUND.>>REPRESENTATIVE SCHULTZ: SO; IF YOU REALIZED THAT YOU ARE GETTING MORE SMALLER DONATIONS YOU WOULD BE WILLING TO INCREASE THAT AND SET ASIDE MORE MONEY?>>REPRESENTATIVE ROSENTHOL: ABSOLUTELY.>>CHAIR GAROFALO: JUST QUICKLY; I ALWAYS THINK IT IS IMPORTANT TO REMIND MEMBERS OF COMMITTEE PARTICULARLY MY GOOD FRIENDS ON THE DFL SIDE THE ISLE WHEN I HEAR THEM TALK ABOUT BUSINESS AND CORPORATION REMINDER BUSINESSES DO NOT PAY TAXES; BUSINESSES COLLECT TAXES. BUSINESSES ARE A TAX AGENT FOR THE GOVERNMENT WHATEVER TAXES WE IMPOSE ON THOSE BUSINESSES THEY PASS TO THE CONSUMERS AND OTHER PROVIDERS SO REMINDER. BUSINESSES DONT PAY TAXES; THEY COLLECT THEM.>>CHAIR: WITH THAT WE WILL THANK YOU GENTLEMEN. WE WILL GO TO->>REPRESENTATIVE LESCH: THANK YOU MR. CHAIR AND CHAIR GAROFALO; THANK YOU FOR THAT GREAT REMINDER. YOU MAY ALSO WANT TO REMIND THE CHAMBER AND ALL THE BUSINESSES THAT COME HERE IN FRONT OF OUR COMMITTEE TO LOBBY TO REDUCE THEIR TAXES THAT THEY SHOULD GO HOME BECAUSE THEY DONT PAY TAXES ANYWAY. I HEAR THAT CONSISTENTLY BEING SAID FROM COMPANIES THAT THEY DONT PAY TAXES AND CHAIR LYNNE CHESKY WOULD SAY THAT WHEN WE TALKED ABOUT THE CORPORATE FRANCHISE TAX. BUT I GUESS AS A OLD PROSECUTOR ITENED TO LOOK AT WHERE THE MOTIVES ARE AND THERE STILL IS INCENTIVES TO REDUCE THEIR TAXES BECAUSE THEY ARE STILL RESPONSIBLE SETTING THE PRICE JZ DON’T THINK IT IS A DIRECT PASS-THROUGH REPRESENTATIVE GAROFALO.>>REPRESENTATIVE GAROFALO YOUR NAME WAS USED. WITH THAT; WE WILL MOVE ON HERE. LET’S GO TO-THERE WAS SOMEBODY THAT HAD A CONCERN I BELIEVE THAT IS AGAINST HELPING COMMUNITIES RAISE MONEY TO HELP THEIR PEOPLE AS BEST THEY CA N. [LAUGHTER]. REMEMBER MEMBERS; LIKE I SAY; DON’T GIVE TILL IT HURTS; GIVE TILL IT FEELS GOOD. YES; PLEASE STATE YOUR NAME AND WHO YOU REPRESENT; MA’AM.>>THAT WAS A INTRODUCTION; MY NAME IS REBECCA LUCERO AND WORK AT THE MINNESOTA COUNSEL OF NON-PROFITS. THANK YOU FOR HAVING ME THIS MORNING. I WANT TO START OUT BY CLEARING SOMETHING UP THAT DEEPLY SUPPORT COMMUNITIES. DEEPLY SUPPORT COMMUNITY FOUNDATIONSER SUPPORT ENDOWMENTS AS A INCENTIVE AND A MECHANISM FOR DONATION. THE MINNESOTA COUNSEL OF NON-PROFIT HAS 2 THOUSAND MEMBERS ACROSS THE STATE; 6 LOCATIONS TO REACH 20 THOUSAND NON-PROFITS AND THAT INCLUDE ALL 501C3 AND NON-PROFITS YOU THINK OF; IT INCLUDE COMMUNITY FOUNDATIONS AND CHURCHES IT INCLUDES SCHOOLS; THESE ARE MEMBER THOFZ MINNESOTA COUNCIL OF NON-PROFITS. SO; WE SHARE THE VALUE OF OUR FRIENDS THAT WERE TESTIFYING TODAY THAT THERE DOES NEED TO BE A POSITIVE GIVING CLIMATE AND AGREE IT SHOULD BE CHARACTERIZED BY INCENTIVES FOR CHARITABLE CONTRIBUTIONS. WHERE WE HAVE A DIFFERENT AOPINION IS WE BELIEVE THAT ALL DONOR JZ CONTRIBUTIONS SHOULD BE TREATED EQUALLY. THAT WE SHOULDN’T SET POLICIES THAT SEND A SIGNAL SOME TYPES OCH GIBBING OR PARTICULAR TYPE OF ORGANIZATIONS ARE MORE VALUABLE AND WORTHY THAN OTHERS. SOME SOMEBODY WHO WANTED TO DONATE $4 THOUSAND TO THE SCHOOLS WOULD NOT BE ELIGIBLE FOR THE TAX CREDIT SO THEIR DONOR INTENT WOULD NOT BE RESPECTED UNDER THIS; SO WHILE WE AGREE THERE IS A IMPORTANT OPPORTUNITY TO CONSIDER TRANSFER OF WEALTH THAT IS A REALLY IMPORTANT CONVERSATION TO HAVE; THIS ISN’T THE RIGHT STRATEGY AND EVERYTHING WITH THE FEDERAL TAX BILL RIGHT NOW WE WOULD RESPECTFULLY REQUEST PRIORITIZATIONS ARE GIVEN TO EXPANDING CHARITABLE DEDUCTIONS THAT ACHIEVE THE GOAL ENCOURAGEING MORE DONATIONS FOR EVERYONE AND FOR EVERY LEVEL INCLUDING ENDOWMENTS AND CHARITABLE FOUNDATION.>>CHAIR: THANK YOU FOR THE REPRESENTING A NON-PROFIT. I WORKED WITH YOUR GROUP BEFORE ON INTERESTING CASES SO THANK YOU FOR ALL YOU DO FOR OUR COMMUNITY.>>THANK YOU. CHAIR DAVIDS.>>CHAIR: QUESTIONS FOR MEMBER FRZ MRS. LIEU SERO? THANK YOU VERY MUCH. POINT IS WELL TAKEN. THE DEPARTMENT.>>REPRESENT TCHB ROSENTHOL: THESE FOUNDATIONS ARE PART OF THE ORGANIZATION THAT WE JUST HEARD FROM; AND WE HAD TALKS WITH THEM AND YOU KNOW; THERE IS NOTHING STOPPING THEM FROM SETTING UP AN ENDOWMENT AS WELL.>>CHAIR: THANK YOU. PLEASE STATE YOUR NAME AND WHO YOU REPRESENT FOR THE REPORT.>>GOOD MORNING MR. CHAIR; REPRESENTATIVE ROSENTHOL AND MEMBERS; PAUL COMINGS AND THE TAX POLICY MANAGER AT DEPARTMENT OF RESERVE NEW. YESTERDAY I PROVIDED SOME CONGRATULATION TOOZ YOU ON YOUR BIRTHDAY MR. CHAIR AND TODAY IT IS REPRESENTATIVE ROSENTHOLS SORT OF BIRTHDAY AND SO I BROUGHT TREATS FOR-IT WENT SO FAST I THINK WE MISSED IT; BUT HERE’S TREATS FOR REPRESENTATIVE ROSENTHOL’S BIRTHDAY.>>CHAIR: IT’S REPRESENTATIVE DETTMERS BIRTHDAY. ALL THOSE THINGS START HERE? [LAUGHTER] JUST WANT TO CLEAR THAT UP FOR YOU. JUST HERE TO HELP.>>I WAS ABLE TO TALK TO REPRESENTATIVE ROSENTHOL LEST LAST NIGHT ABOUT THE BILL.>>I SHOULD IT SHOULD START BY SIN ORTY. [LAUGHTER].>>[INAUDIBLE COMMENTS]>>IN THE SPIRIT OF BIPARTISAN COMPROMISE I’LL GIVE THIS TO CHAIR CARLSON.>>WE ARE OFF TO THE GOOD START OF A LEGISLATIVE SESSION.>>CHAIR: YES WE ARE; WE HAVE TO TAKE A BRIEF TIMEOUT.>>REPRESENTATIVE ROSENTHOL: MY BIRTHDAY ACURED BETWEEN YESTERDAY AND TODAY.>>CHAIR: HE SHOULD GET THESE FIRST. [INAUDIBLE COMMENTS] WE HAVE TO HAVE OUR PRIORITIES STRAIGHT HERE. LET’S GET COOKIES OUT HERE. THANK YOU; MR. COMINGS THANK YOU FOR HAVING A BIRTHDAY AND REPRESENTATIVE DETTMER THANK YOU FOR HAVING A BIRTH DAY.>>YOU MR. CHAIR TURNING 59 AND A HALF.>>CHAIR: MR. COMINGS.>>THIS BILL PROVIDES 25 PERCENT TO ENDOWMENT FUNDS OF COMMUNITY FOUNDATIONS; THE CREDIT REQUIRES A MINIMUM CONTRIBUTION OF $5 THOUSAND WITH A MAXIMUM CREDIT OF $25 THOUSAND. CREDIT APPLIED TO INDIVIDUAL INXHRKSER CORM CORPORATE AND INSURANCE PREMIUM TAXES AND AS YOU HEARD LIMITED TO $4 MILLION A YEAR. THIS PROPOSAL WOULD PROVIDE A TAX CREDIT FOR CONTRIBUTIONS TO ENDOWMENTS NOT AVAILABLE TO NON-PROFITS. SOME OF THESE ENDOWMENTS SUBSIDIZE SMALLER NON-PROFIT ORGANIZATIONS BUT IF THE INTENT IS ASSIST THESE ORGANIZATIONS THIS PROPOSAL DOESN’T PROVIDE A DIRECT METHOD OF DOING SO. THE PROPOSAL MAY LESSON CHARITABLE GIFTS NOT QUALIFYING FOUNDATIONS SINCE THE TAX BENEFIT IS CONSIDERBLY LARGER. THERE ARE TAXPAYERS THAT GAVE TO NON-PROFITS THAT SHIFT THE DONATION TO QUALIFYING FOUNDATIONS. IT IS UNCLEAR TO WHAT DEGREE THIS PROPOSAL INCREASE CHARITABLE GIVING IN MINNESOTA. PROVIDES THE MOST BENEFIT TO TAXPAYERS THAT ALREADY DONATE TO FOUNDATION JZ RECEIVE A TAX BENEFIT FOR BEHAVIOR THEY ARE ALREADY ENGAGING IN; THE GOAL IS TO CHANGE BEHAVIOR AND THIS MAY NOT BE THE MOST EFFICIENT WAY TO DO THAT. THE 25 PERCENT CREDIT WILL GO TO THE THE PROGRAMS AND DECISION PAID BY THERE ENDOWMENTS. IF MINNESOTA WANT TOOZ SUBSIDIZE PROGRAMS IN TAXPAYER DOLLARS WE SHOULD CONSIDER APPROPRIATING THE MONEY TO PROGRAMS PRIORITIZED BY THE SLEDGE SLAICHER AND GOVERNOR. THE BILL ALSO AS A REQUIREMENT ANY CONTRIBUTION MUST BE AT LEAST $5 THOUSAND TO RECEIVE A TAX CREDIT. THIS LIMITS THE NUMBER OF MINNESOTANS THAT BENEFIT FROM THE CREDIT SINCE ONLY A LIMITED NUMBER OF WEALTHIER TAXPAYERS CAN MAKE A DONATION THAT LARGE. IF INCREASING DONATIONS TO FOUNDATION IS A GOAL THE $5 THOUSAND MINIMUM MAY NOT BE THE MOST EFFECTIVE WAY OF DOING SO. WE LOOK FORWARD WORK WG THE COMMITTEE AND STAFF TO DISCUSS OTHER DRAFTING IDEAS THAT CLARIFY THE BILL AND IF THIS BILL MOVES THROUGH THE PROCESS THE DEPARTMENT OF REVENUE LOOK FRZWARD WORKING WITH YOU; REPTIVAL ROSENTHOL AND STAFF AND THANK YOU FOR THE OPPORTUNITY TO BE A RESOURCE.>>CHAIR: YOU’RE A RESOURCE TODAY. THANK YOU. ANY QUESTIONS FOR THE DEPARTMENT OR MR. COMING? THANK YOU FOR YOUR STATEMENT; MR. COMINGS. YOU WANT TO WRAP IT UP? ANY OTHER QUESHZS FOR REPRESENTATIVE ROSENTHOL?>>REPRESENTATIVE ROSENTHOL. THANK YOU MR. CHAIR AND MEMBERS. THIS IS A UNIQUE OPPORTUNITY TO CAPTURE GENERATIONAL TRANSFER OF WEALTH. WE ARE TALK ABOUT IN THE VICINITY OF $50 BILLION AND WHAT THIS WOULD DO WOULD CAPTURE SOME OF THE MONEY TO OUR NON-PROFITS COMMUNITY FOUNDATIONS TO ACTUALLY BUILD AND HELP MAINTAIN THE COMMUNITY WHERE THE MONEY WAS MADE AND THIS GOES THROUGHOUT THE STATE AND BEING DONE IN IOWA; WE THINK WE CAN BUILD ABOUT $127 MILLION AND I JUST THINK THAT THE UNIQUE OPPORTUNITY AND IT’S ONCE IN A LIFE TIME OPPORTUNITY AND DOES SUNSET IN 2032. I WOULD ASK FOR THE COMMUNITY SUPPORT.>>CHAIR: THANK YOU VERY MUCH. WITH THAT REPRESENTATIVE MARQUART RENEWS MOTION HOUSE FILE 2339 LAID OVER FOR POSSIBLE INCLUSION IN THE OMNIBUS TAX BILL. THANK YOU FOR REPRESENTATIVE ROSENTHOL; GOOD DISCUSSION ON A VERY IMPORTANT TOPIC. ITEM NEXT REPRESENTATIVE METSA. MOVES HOUSE FILE 2296. REPRESENTATIVE METSA IS THAT YOUR AMENDMENT?>>REPRESENTATIVE METSA: IT IS.>>MOVE THE AMENDMENT TO GET THE BILL IN [INAUDIBLE COMMENTS] HOUSE FILE 2296 TO THE COMMITTEE. TO THE BILL; SIR.>>REPRESENTATIVE METSA: THIS BILL STARTED A FEW YEARS BACK IN MY FIRST TERM HERE; AND THE VISION OF IT WAS WE HAD HAD A FEW ISSUES WITH THE MPCA AND DNR NOT BEING ABLE TO TALK TO ONE ANOTHER AS EFFICIENTLY AS THEY COULD OF AND IN REGARD TO THE PERMITTING PROCESS WE WANT THE AGENCIES COMMUNICATING TO MAKE SURE THE STATE EMPLOYEES CROSS THE T AND DOT I THAT NEED TO BE DONE TO PROVIDE IN THE MOST EFFICIENT FASHION SO THIS BILL ALLOWED THOSE NEW HIRES THAT WERE APPROPRIATED OUT OF THE DOLLARS THAT WE PASSED TO WORK TOGETHER IN A INTERAGENCY FASHION AND OVER THE LAST FEW YEARS IT HAS BEEN A IMPORTANT TOOL BOTH IN THE [INAUDIBLE COMMENTS] AND IN THE NON FERRIS MINUS INDUSTRIES AS WELL AS I’M SURE OTHER PERMITTING AREAS. IN SPECIFIC RIGHT NOW WHAT WE HAVE RUN INTO IS THE 2 AND A HALF CENTS PER TON THAT WAS DEDICATED FELL SHORT OF THE ACTUAL COST OF HIRING SOME OF THESE FULL TIME EQUIVALENT; AND IN ORDER TO KIND OF STABILIZE THAT OUT; WHAT WE DID IS INSERT A FLOOR AT THE $1.1 MILLION LEVEL THAT YOU SEE IN THE LANGUAGE AND THERE WAS ALSO AN EFFECTIVE DATE CHANGE AT THE END WHICH WAS INCORPORATED IN THE AMENDMENT; SO ESSENTIALLY THIS WOULD HELP GET ONE FULL TIME STAFF NOW IN ADDITION TO WHAT THEY ALREADY DONE UP IN WORKING AND WOULD STAND FOR ANY QUESTIONS.>>CHAIR: BEFORE WE GO TO THATD; ANYONE HERE TO TESTIFY ON BEHALF OCH THE BILL? OR RESOURCE? ANYONE HAVE CONCERNS. ANYONE WITH CONCERNS ABOUT THIS BILL? REPRESENTATIVE METSA YOU KNOW WHAT THAT MEANS. DOES THE DEPARTMENT WISH TO TESTIFY? THANK YOU MR. COMPLINGS. THERE IS NO ONE WITH CONCERNS SO QUESTION FOR THE AUTHOR. DID YOU WANT THE GENTLEMEN TOTESTIFY OR?>>REPRESENTATIVE METSA: THAT WOULD BE GREAT.>>CHAIR: STATE YOUR NAME.>>JOE HENDERSON; I REPRESENT MINNESOTA DEPARTMENT OF NATURAL RESOURCES AND WORK IN LAND AND MINERALS. I’M A MANAGER AND PERMIT COR COORDINATION AND WORK WITH THE STAFF HIRED FROM THESE FUND THMPT DNR DOES SUPPORT THIS CHANGE IN LANGUAGE. THESE FUNDS HAVE ALLOWED OVER THE LAST FEW YEARS AS REPRESENTATIVE METSA SAID TO HAVE SHARED RESOURCES WITH MINNESOTA POLLUTION CONTROL AND USE THE RESOURCES ON CRITICAL PATH ISSUES; THE FLEXIBILITY IT ALLOWS IS VERY BENEFICIAL FOR US; IT ALLOWS US TO TRY TO PUT THE RIGHT SKILLS AT THE TIME AND NEED IN THE AGENCY THAT WE NEED THEM TO HAVE REVERSE SLOWING OF THE REGULATORY WORK IN THE MINING AREAS. IT ALLOWED US TO HIRE HYDRAULGIST; PERMIT WRITERS; WETLAND SPECIALISTS; PROJECT MANAGERS. WE HAVE RIGOROUS ENVIRONMENTAL REVIEW AND PERMITTING PROGRAMS AND HAVING THESE EXPERTS IS BENEFICIAL. THE CURRENT STRUCTURE HAS REPRESENTATIVE METSA SAID ALLOWS YEARLY CHANGES AND BALANCES THE MONEY HAVING THE FLOOR WOULD ALLOW THE STABILITY TO HIRE THE ADDITIONAL PERSON THAT WE HAVE HEARD FROM THE MINING COMMUNITY THAT THEY SEE AS A CURRENT NEED. IT A WETLAND SPECIAL IST IN THE HIBING OFFICE THAT WOULD BE AVAILABLE ON SHORTER CALL TO BE ON SITE AND DO INSPECTIONS AND DO SOME OF THE WORK THAT THEY ARE SAYING IS CRITICAL IN MOVING SOME OF THE PERMITTING PROJECTS AND ENVIRONMENTAL REVIEW PROJECTS FORWARD.>>QUESTIONS FOR MR. HENDERSON? OKAY; THANK YOU. REPRESENTATIVE METSA.>>REPRESENTATIVE METSA:>>CHAIR: SORRY; REPRESENTATIVE SCHULTZ.>>REPRESENTATIVE SCHULTZ: CAN YOU REMIND THE BENEFITS OF HAVING A OCCUPATIONAL TAX IN LIEU OF A CORPORATE FRANCHISE TAX?>>REPRESENTATIVE METSA: I WOULD LEAVE THAT I THINK REPRESENTATIVE SCHULTZ TO RESEARCH.>>MR. MICHAEL: MADAM CHAIR-MR. CHAIR; REPRESENTATIVE SCHULTZ; THE FIRST OF ALL THE CONSTITUTION OF THE STATE REQUIRES THE LEDGE SLAICH TOOR IMPOSE A OCCUPATION TAX; SO THERE IS THAT; BUT THAT IS SIMPLY A MATTER OF NOMENCLATURE. THE OCCUPATION TAX ITSELF IS CALCULATED IN A WAY THAT IS BASED ON SORT OF A SYNTHETIC MEASURE OF INCOME AND SO IT DOES NOT ESSENTIALLY GET INCORPORATED ON A COMBINED REPORT BASIS WITH THE STEEL MAKERS THAT IN THE OLD DAYS USE TODAY ALWAYS OWN THE MINES AND IN THOSE CIRCUMSTANCES IT HAD THE EFFECT OF-WHEN I SAY ON A SYNTHETIC BASIS BASICALLY YOU LOOK AT THE MINE AND LOOK AT THE LAKE EERIE PRICE OF THE ORE AND ALLOW CERTAIN DEDUCTIONS AND CALCULATE WHETHER OR NOT THEY HAVE INCOME AND APPLY THE CORPORATE FRANCHISE TAX RULES TO THAT INCOME OPPOSED TO SAYING; HOW MUCH OF YOUR MINING OPERATIONS THAT IS PART OF YOUR VERTICAL-INTEGRATED STEEL MAKING; HOW MUCH OF THAT IS REALLY ATTRIBUTABLE TO THE MINE. IT IS VERY DIFFICULT TO DO SO I THINK FOR DECADES OR CENTURY WE HAD THIS SYSTEM THAT SAYS WE ARE GOING TO CALCULATE A SORT OF SYNTHETIC RATE OF RETURN ON THE MINING PART OF THE OPERATION AND IMPOSE OUR TAX ON THAT THAT WON’T BE AS MUCH EFFECTED BY THE REST OF INTEGRATEED STEEL MAKING. NOW; AS THINGS HAVE CHANGED OVERTIME WE HAVE A MINING INDUSTRY NOT AS INTEGRATED AS IT WAS; SO THE U.S. STEEL IS STILL A CASE LIKE THAT; BUT CLEVELAND CLIFFS TAKE THE OTHER BIG PRODUCER UP THERE IS JUST REALLY A MINING COMPANY; AND SO MAYBE YOU COULD ACTUALLY GO AWAY FROM THAT; BUT I GUESS THE SIMPLE ANSWER IS; IT WAS A WAY TO ISOLATE INCOME FROM MINING FROM THE REST OF THOSE STEEL MAKING OPERATIONS; SO THAT THE TAXES ONLY APPLY TO THE MINING OPERATIONS AND THAT REQUIRES SORT OF SEPARATE SYNTHETIC INCOME CALCULATIONS.>>REPRESENTATIVE SCHULTZ: THANK YOU FOR THAT HISTORY.>>CHAIR: QUESTIONS FOR MR. HENDERSON OR REPRESENTATIVE METSA? THANK YOU VERY MURCH. YOU LIKE TO WRAP IT UP?>>REPRESENTATIVE METSA: THANK YOU MR. CHAIR. I WOULD JUST ADD THAT WE ARE HEARING FROM SOME MINING COMPANIES A MORE INTEGRATED APPROACH MIGHT BE MORE APPROPRIATE AS WE MOVE IN A COMPETITIVE GLOBAL MARKET AND SO I THINK KEEPING OUR OPTIONS OPEN IN REGARD HOW TEE COLLECT THESE AND MAKING SURE THE COMPANIES COULD BE THRIVING AND HAVING LESS UP AND DOWN AS THE GLOBAL MARKET EFFECTS OUR PRICES HERE AND SALABILITY AND WE LOOK FORWARD TO THE NEWS TODAY FROM PRESIDENT TRUMP ON SOME OF THE DECISIONS ON THE STEEL TARIFFS I CLOSE WITH THAT MPTD THANK YOU VERY MUCH-SFR YOUR TIME.>>CHAIR: RENEW MOTION HOUSE BILL 2296 LAID OVER FOR POSSIBLE INCLUSION IN THE OMNIBUS TAX BILL. THANK YOU REPRESENTATIVE METSA AND MR. HENDERSON. OKAY; ITEM NEXT REPRESENTATIZE DRAZKOWSKI MOVES HOUSE FILE 2833. I DON’T SEE AMENDMENTS. DO WE HAVE AMENDMENTS?>>REPRESENTATIVE DRAZKOWSKI: I DO NOT; MR. CHAIR.>>CHAIR: INTRODUCE YOUR BILL.>>REPRESENTATIVE DRAZKOWSKI: HOUSE BILL 2833 FOCUS ON TIFF INCOME AND WHAT IT COULD BOO IS PROVIDE A SUBTRACTION FOR TIFF INCOME FROM THE MINNESOTA INCOME TAXES. MEMBERS; WE ARE FINDING WAYS AND LOOKING AT WAYS TO HELP ENCOURAGE OUR ECONOMY AND YOUNGER WORKERS AND BEGINNING WORKERS. THIS IS ONE WAY TO DO IT; AND SO WANTED TOBRING THIS FORWARD AS A OPPORTUNITY FOR US TO PROVIDE THAT INNOCENTIVE FOR PEOPLE AS THEY GET GOING IN THE WORKPLACE. WITH THAT MR. CHAIR WE HAVE JAVIER BICKT TO TALK ABOUT THE BILL.>>CHAIR: STATE JOUR NAME.>>JAIVIER BICKT AND I’M HERE TO REPRESENT ABOUT 100 THOUSAND PEOPLE WHO ROLL UP THEIR SLEEVES AND WORK IN MINNESOTA AVENUE DAY. AS REPRESENTATIVE DRAZKOWSKI MENTIONED THIS IS A OPPORTUNITY WE HAVE TO HELP THE WORKER CLASS EARN MORE MONEY. ACCORDING TO THE BUREAU OF LABOR STATISTICS FROM THE MINNESOTA DEPARTMENT OF REVENUE; THE TAX RESEARCH DIVISION AUGUST 14; 20077 THIS EFFECTS ABOUT 99 THOUSAND TAXPAYERS AND NOT ONLY THAT; BUT ACCORDING TO THEIR STATISTICS ABOUT $2.3 BILLION OF WAGES AND IF YOU AVERAGE THAT OUT THIS WILL EFFECT PEOPLE IN THE LOWER CLASS THAT EARN ABOUT $23; 469. THIS PUTS MORE MONEY IN THE POCKETS OF THOSE PEOPLE. WE TALK ABOUT TAX CUTS THESE ARE PEOPLE THAT ARE WORKING ACCORDING TO BUREAU OF LABOR STATISTICS; RESTAURANT; [INAUDIBLE COMMENTS] PEOPLE THAT DO PED PEDICURES [INAUDIBLE COMMENTS] I HAVE A FEW STORY AND PEOPLE THIS IS EFFECTING. I TALKED TO NOB FOB A UBER DRIVER AND SAID HOW WOULD YOU FEEL YOU GOT TO KEEP MORE TIPS. HE SAID THIS WILL BE GREAT. HE DRIVES IN MINNEAPOLIS AT NIGHT SO HIS WIFE CAN WATCH THE KIDS DURING THE DAY AND THIS WILL HELP PUT MORE MONEY IN HIS POCKET. ANNIE WHO IS MARRIED IN BLUMING TON; THIS HELPS NOT JUST POOR BUT MIDDLE CLASS. SHE HAS 4 KIDS AND CAUSE MOTOLOGY LICENSE AND JUST THE HEALTHCARE COST FOR KIDS THEY HURT A LOT SO THIS IS A ANOTHER WAY TO HELP EASE THAT BURDEN AND HELP HER MAKE A LIVING. MY SISTER IN LAW WHO SERVES AS A COZ MOTALLGIST IN BLOOMING TON LOOK TO DO WORK ON THE HOUSE AND 18 PERCENT THE WAGES COMES FROM TIPS. THIS WILL HELP REMODEL THE HOUSE AND IMPROVE THE LIFESTYLE. MR. SISTER SHE IS A SINGLE MOTHER WITH THREE KIDS AND LIVES IN WEST BLOOMING TON AND WORKS IN EAST BLOOMING TON AND I TALKED TO HER ABOUT THIS; REPRESENTATIVE LYNNE CHESSKY SHEED SHE LEFT A GOOD TIP AND SAID SAY TIPS ARE DEPENDS ON HOW GOOD YOU SERVE AND SOME DON’T TIP AS ALL. WITH TIPS IT’S NOT JUST PAY FOR SERVICE; YOU DONT SIGN A PRA CONTRACT; THIS IS SOMEONE GIVING OUT OF THE GOODNESS OF THE HEART LIKE A GIFT. AT THE FEDERAL LEVELS GIFTERIZE NOT TAXED BUT SHE TOLD ME A STORY OF THE MOM AT THE SAME RESTAURANT AND LOST MONEY ON THE PAY CHECK BECAUSE THE WAY THE TAX CORRODE CODE IS SET UP NOW THE GOVERNMENT ASSUMES YOU GET TIPS AND TAKE 8 PERCENT OF OUT YOUR CHECK. SHE LOST MONEY BECAUSE SHE DIDN’T GET TIPS. CHAD A SERVER AS A ITALIAN RESTAURANT IS LOOKING AT POPPING THE QUESTION AND THIS MAY BE A GOOD OPPORTUNITY TO HELP SAVE MONEY. I KNOW A LOT OF CHAD’S. SIDY A GRANDMOTHER WHO WORKS WITH HER SINGLE MOM-I BOWL AT SOUTH TOWN AND WORKS TWO JOBS TO HELP TAKE CARE THE GRAND DAUGHTER AND THESE ARE OPPORTUNITY TO HELP PEOPLE THAT WORK EVERY DAY WITHOUT WORRYING ABOUT TAX BREAKS TO THE 1 PERCENT OR HOWEVER YOU WANT TO WORD IT; THIS HELPS EVERY DAY PEOPLE THAT ON AVERAGE MAKE $23 THOUSAND A YEAR. I THINK THIS WOULD GO A LONG WAY TO HELP. LASTLY; I WANT TO SAY THIS REALLY SHOULDN’T EFFECT SERVICE INDUSTRY TOO MUCH. THERE IS NOT TOO MUCH THEY HAVE TO DO ACCORD TOOG THE BILL; IT PREVENTS TIPS TO BE TAXABLE INCOME.>>CHAIR: ANY QUESTIONS FOR MR. BICKT? I HAVE ON MY LIST HERE OTHER TESTIFIERS DAN [INAUDIBLE COMMENTS] FROM MINNESOTA RESTAURANT ASSOCIATION AND WAYNE [INAUDIBLE COMMENTS] ANYONE ELSE THAT WISHES TO TESTIFY ON BEHALF OF THIS BILL? OR WITH CONCERNS? WOULD THE DEPARTMENT LIKE TO TESTIFY? YOU CAN STAY AS LONG AS YOU WANT. PLEASE STATE YOUR NAME AND WHO YOU REPRESENT.>>THANK YOU; MR. CHAIR AND MEMBERS; DAN MACKLE ROY EXECUTIVE RISE PRESIDENT OF MINNESOTA RESTAURANT ASSOCIATION. THANK YOU FOR RAISING THE ISSUE AND TO THE TESTIFIER TO TALK ABOUT THE GREAT MEN AND WEM WHOON WORK IN OUR INDRAIST IN TIPPED POSITIONS. I DO HAVE COUPLE OF TECH CLT CONCERNS. IF WE ARE READ THG BILL CORRECTLY; IT AUTHORIZES A SUBTRACTION IN 2018 BUT AUTHORIZE EMPLOYERS TO ADJUST WITHHOLDING IN 2020. IF THIS MOVES AHEAD WE HAVE TO RECONCILE THOSE THINGS. THERE IS ALSO A COMMENT IN THE REVENUE NOTE ABOUT LEVEL OF COMPLIANCE WITH THE TIP REPORTING REQUIREMENT. I THINK HISTORICALLY THAT HAS BEEN CORRECTED ACCURATE BUT CHANGING DRAMATICALLY AS MORE AND MORE GUESTS PAY BY CREDIT CARD AND DEBIT CARD AND FASTEST GROWING FORM OF PAYMENT IS MOBILE PAY ON PHONES. BURGER KING TOLD ME SEVERAL WEEKS AGO 50 PERCENT OF QUICK SERVICE IS ON CARD OR MOBILE PAY. TABLE SERVICE RESTAURANTS IS APPROACHING 90 PERCENT IN MANY CASES. LITTLE MORE IN THE METRO THAN GREATER MINNESOTA BUT THE ABILITY TO TRACK TIPS IS GREATER. WE HOPE THIS PROVOKES DISCUSSION ABOUT TIPS MORE BROADLY. WHEN I CAME TO THE RESTAURANT ASSOCIATION 7 AND A HALF YEARS GOY ABOUT 50 PERCENT OF VOLUME IS TABLE SERVICE WHICH IS WHERE THE BETTER TIPPING JOBS ARE. THERE ARE TIPS NOW AT COFFEE SHOPS AND FAST CASUAL; THEY ARE NOT LARGE TIPS; THEY REFLECT THE TESTIFIERS LEVEL OF INCOME; HOWEVER; WE DID A SURVEY OF 110 LOCIGEZS IN MINNEAPOLIS FOR OCTOBER 2016 AND THEY RANGED FROM [INAUDIBLE COMMENTS] AND COUNTER SERVICE LOW AVERAGE CHECK RESTAURANT UP THROUGH THE STEAK HOUSES AND HIGH AVERAGE CHECK. WE WERE PLEASED TO SEE OUR KITCHEN MEMBERS ARE MAKING MORE THAN MINIMUM WAGE BUT STILL NOT A LOT; ABOUT $13 AND THE AVERAGE TIPPED EMPLOYEE MAKE $28 IN TIPS. THEY WORK BETWEEN 25 AND 30 HOURS BUT STILL GOOD JOBS. WE ARE CONCERNED IF THE PRESSURE TIPS NOW COUNT AS INCOME AND COUNT FOR WORKERS COMP AND COUNT FOR UNEMPLOYMENT AND DONT COUNT FOR MINIMUM WAGE. THERE IS A NATIONAL MOMENTUM TO RECOGNIZE TIPS MORE. HAWAII PASSED RECOGNIZE OF TIPS MAINE REPASSED IN 2017; SEATTLE CITY COUNCIL INCLUDED A SUNSET IN 2023 BUT UNDERSTANDING TIPS ARE REAL MONEY AND THANK REPRESENTATIVE DRAZKOWSKI FOR RAISING THE QUESTION HOW CAN WE PROTECT GOOD PAYING TIP JOBS WITHOUT PENALIZE THOSE WHO EARN A FEW TIPS. THANK YOU MR. CHAIRMAN AND REPRESENTATIVE DRAZKOWSKI.>>CHAIR: QUESTION FRZ MR. MAC LUROY. THANK YOU VERY MUCH. MR. LUM BURG. I THINK WE GO-ANYONE WITH CONCERNS? WE GO TO THE DEPARTMENT THEN. WELCOME TO CHITY.>>PAUL WUMINGS. I DO NOT HAVE ADDITIONAL COOKIES FOR REPRESENTATIVE DRAZKOWSKI; BUT I WANT ABLE TO SEND A NOTE TO REPRESENTATIVE DRAZKOWSKI YESTERDAY. ON THE BILL ALLOWS SUBTRACTION FOR TIP COME COME IN TAX YEAR 2018 AND REMOVES OTHER REQUIREMENT OF WITHHOLDING MINNESOTA INCOME TAX FROM TIPS FOR PAY ROLL POORDS AFTER DECEMBER 31; 2019. FROM ADMINISTRATIVE PERSPECTIVE IT IS IMPORTANT TO POE KNOW THE DEPARTMENT WILL NOT HAVE THE INFORMATION ON THE AMOUNT OF TIPS RECEIVED AND COULD NOT STANCHIATE THE SUBTRACTION A INDIVIDUAL COULD TAKE. IN ADEITION THE REQUIREMENTS WITHHOLD INCOME TAX FROM TIP INCOME BEGINS IN 2020 THE SUBTRACTION FROM THE INDIVIDUAL INCOME TAX BEGINS IN 2018. THIS MAY RESULT IN OVWITHHOLDING FROM REGULAR PAY THAT NEEDS TO BE REFUNDED IN 2018 AND 19. SUBTRACTION OF TIP INCOME BEGINS 18; HOWEVER WE WILL CONTINUE TO WITHHOLD TO 2020. FINALLY; I WANTED NOTE THIS IS A MAJOR DEVIATION HOW WE ATHLETE INCOME. IT IS ALSO A SUBSTANTIAL DEVIATION FROM THE FEDERAL WITHHOLDING REQUIREMENTS. WE HAVE MINNESOTA SUBTRACTIONS THAT EXEMPT VARIOUS ITEMS FROM THE INCOME TAX; THIS IS THE FIRST MAJOR DEVIATION FROM THE WITHHOLDING TAX CAUSES FRUSTRATION AND CONFUSION FOR TAXPAYERS AND TAX PREPARERS. THIS MEANS EMPLOY OARS WOULD HAVE TO KEEP SEPARATE WITHHOLDING RECORDS AND THRESHOLDS FOR THE FEDERAL AND STATE GOVERNMENT. IF THE BILL MOVES THROUGH THE PROCESS THE DEPAMENT OF REVENUE LOOKS FORWARD WORK WG YOU AND CHAIR DRAZKOWSKI AND STAFF AND APPRECIATE THE TONIGHT TO COME BEFORE COMMITTEE TODAY.>>CHAIR: ANY QUESTION FRZ THE DEPARTMENT.>>CHAIR DAVNIE: MR. MAC LULOY RAISED THE ISSUE AND WOND ER WHAT IMPACT WOULD THIS HAVE ON TIPPED EMPLOYEES; UNEMPLOYMENT INSURANCE COMPENSATION WHETHER THEY ARE LAID OFF AND WHAT EFFECT WOULD IT HAVE ON THE WORKERS COMP IF THEY ARE INJURED ON THE JOB? WOULD IT NEGATIVELY EFFECT THEM?>>I DON’T KNOW THE ANSWER TO THAT QUESTION. MAYBE MR. WILLIAMS OR MR. MICHAEL–>>MR. CHAIRMAN AND REPRESENTATIVE DAVNIE I DON’T THINK THE INCOME TAX THE ABILITY WOULD HAVE ANY EFFECT ON THE COVERAGE UNDER THOSE PROGRAMS; BUT I AM NOT KNOWLEDGEABLE ABOUT WORKERS COMP OR UNEMPLOYMENT BUT THAT IS MY INSTICKT.>>CHAIR DAVNIE: THANK YOU MR. CHAIR.>>REPRESENTATIVE HERTAUS: THANK YOU MR. CHAIR. MR. COMINGS; AS I LISTEN TO THE TESTIMONY ABOUT TIPPED INCOME; IS THERE IS A STATUTORY DEFINITION OF WHAT A TIP IS? IS THERE ANY PROHIBITION FROM TIPPING ANY OTHER TYPE OF EMPLOYEE THAT PROVIDES A SERVICE? WHAT IS THE DIFFERENCE BETWEEN A TIP AND BONUS?>>MR. COMINGS: I THINK I’LL LET MR. MICHAEL FURTER RESPOND BUT THERE IS A DEFINITION OF INCOME AND WITHIN THAT DEFINITION IT DOES SPECIFY TIPS; SO I THINK MR. MICHAEL WILL KNOW PROBABLY THE WHOLE DEFINITION WHAT INCOME IS SO I’LL DIFFER TO MR. MICHAEL.>>MR. MICHAEL: MR. CHAIR AND REPRESENTATIVE HERTAUS; REPRESENTATIVE DRAZKOWSKI’S BILL REFERENCES DEFINITIONS IN FEDERAL LAW THAT APPLY TO SPECIFICALLY REPORTING TIPPED INCOME AND SO; THE SUBTRACTION WOULD BE TIED TO THOSE FEDERAL DEFINITIONS FOR REPORTING TIPPED INCOME; AND SO A BONUS THAT’S PAID BY THE EMPLOYER WOULD NOT BE CONSIDERED A TIP UNDER THE BILL.>>REPRESENTATIVE HERTAUS: THANK YOU.>>CHAIR CARLSON: MR. CHAIREN I’M INTERS IN WHAT THE IMPACT WOULD BE ON THINGS LIKE RETIREMENT. THE REASON I RAISE THAT QUESTION WHEN WE TALK ABOUT TIPPED INCOME WE OFTEN TALK ABOUT THE RESTAURANT INDUSTRY BECAUSE THAT IS WHERE THE GREATEST NUMBER OF EMPLOYEES ARE BUT THERE ARE OTHER OCCUPATIONS WHERE TIPS ARE PART THE INCOME AND I’LL USE MY FATHER WHO IS DO DECEASED BUT HE WAS A TIPPED EMPLOYEE WORK WG FOR THE RAILROAD AND USED TO SAY TONGUE AND CHEEK HE WOULD SAY WE HAVE THE LOST PAY SCALE ON THE ENTIRE RAILROAD BUT WE HAVE AMONG THE HIGHEST SEN ORTY LIST SO THE TIPS WERE VERY GOOD BUT WHEN HE RETIRED; THE RETIREMENT THE RAILROAD RETIREMENT WAS BASED OEN THE INCOME NOT INCLUDING THE TIPS; AND SO I WOULD ARGUE THAT HE MADE VERY GOOD MONEY WHEN HE WAS RAISING 5 CHILDREN BECAUSE THE TIPS; BUT WHEN HE RETIRED MY MOTHER AND FATHER DID PAY A PRICE IN THE SENSE THEY ARE A LOWER RETIREMENT BECAUSE OF THE WAY THE RAILROAD RETIREMENT WAS CALCULATED. SO I JUST PUT THAT ON THE TABLE AS A PERSONAL ANECDOTE; IF YOU WILL; THAT YOU HAVE TO LOOK AT ALL OCCUPATIONS THAT MIGHT BE SUBJECT TO TIPS AND ALSO LOOK AT WHAT THE INCOME MIGHT BE ON VARIOUS FRINGE BENEFITS AND RETIREMENT AND SO ON. RAILROAD RETIREMENT IS SOMEWHAT SIMILAR TO SOCIAL SECURITY BUT IT IS DIFFERENT; A DIFFERENT RETIREMENT SYSTEM IN ITS ENTIRETY BUT IT IS BASED-I DON’T KNOW IF IT IS PUBLIC EMPLOYEES OF THE HIGH 5 OR CAREER AVERAGE BUT I THINK IT MAY HAVE BEEN CAREER AVERAGE.>>ANY ORT QUESTIONS FOR THE DEPARTMENT OR AUTHOR?>>IF ANYBODY LOOKED AT THE AUTHOR OR ANYBODY HAD LOOKED AT THE IMPACT ON RETIREMENT IS MY POINT IN TERMS OF ADVOCATING FOR THE BILL? YOU HAVE PEOPLE THAT WORK FOR HOTELS THAT MAY BE THE DOORMAN OR THEY MAY PARK CARS OR ALL KINDS OF OCCUPATIONS SUBJECT TO TIP INCOME AND OFTEN THE EMPLOYER ASSUMES YOU WILL HAVE A CERTAIN AMOUNT OF INCOME BASED ON THE TIPS; THE MAN OR WOMAN WHO MIGHT WORK AT A SITUATION IN THE RESTAURANT OR SOME OTHER PLACE. THERE IS A TON OF DIFFERENT OCCUPATIONS IS MY POINT AND SO I THINK YOU HAVE TO LOOK AT THINGS LIKE THE BIGGEST ONE IS PROBABLY RETIREMENT AT LEAST FROM MY UNDERSTANDING.>>CHAIR DRAZKOWSKI: THANK YOU MR. CHAIR AND MAYBE MR. MICHAEL CAN CORRECT ME IF I’M WRONG BUT UNDERSTAND THE WAY THE BILL IS WRITTEN THE TIPPED INCOME IS STILL VIEWABLE FOR TOO THE ISR AND KAPARTMENT OF REVENUE; WE SIMPLY REMOVE THE-PROVIDE TRACTION FOR THE TAX ON THAT AND SO IT SHOULDN’T-SH THERESHOULD STILL BE FULL TRANSPARENCY THE AMOUNT OF TIP INCOME EARNED.>>THE IRS IS ONE THING. MY FATHER ALWAYS HAD TO REPORT HIS TIPPED INCOME TO THE IRS; BUT THE WAY RAILROAD RETIREMENT WAS CALCULATE THAT WAS A DIFFERENT QUESTION. THAT WAS BASED ON THE WAGES AND SO BEING THE LOWEST PAID EMPLOYEES WORKING FOR THE RAILROAD IN MY EXAMPLE THEY GOT A SMALLER PENSION ON THE RAILROAD RETIREMENT. THE TIPS WERE NOT COUNTED FOR RETIREMENT PURPOSES. THAT IS A DIFFERENT QUESTION THAN THE IRS. HE WAS ALWAYS VERY CAREFUL TO REPORT THE INCOME TO THE IRS AND ASSUME TO THE STATE OF MINNESOTA AS WELL.>>CHAIR DRAZKOWSKI: I THINK IT IS A DIFFERENT QUESTION THAN IN THE BILL BUT MAYBE MR. MICHAEL CAN ANSWER IT.>>MR. MICHAEL. IT IS HARD FOR ME TO CONCEIVE HOW THIS BILL WILL HAVE MUCH EFFECT ON PARTICIPATION IN OR THE AMOUNT THAT IS PUT INTO RETIREMENT SAVINGS. I SUPPOSE IT COULD IN THIS SENSE. FIRST OF ALL; I WOULD SAY ALL MOST ALL TIPPED-PROBABLY VERY FEW TIPPED EMPLOYEES ARE IN OLD FASHIONED DEFINED BENEFIT PENSION PLANS. YOU ARE RIGHT THAT TO THE EXTENT RAILROAD EMPLOYEES LIKE [INAUDIBLE COMMENTS] THAT TYPE OF THING; I SUPPOSE THERE ARE SOME OF THOSE AND THEY HAVE THEIR OWN DEFINED BENEFIT SYSTEM THAT REPLICATES SOCIAL SECURITY AND PRIVATE PENSION AND NONE OF THAT IS EFFECTED BY ANY OF THIS. MOST PEOPLE IN THE SERVICE INDUSTRY I GUESS ARE EITHER IN 401K PLANS OR HAVE NO RETIREMENT PLAN AT ALL AND HAVE SAVE ON THEIR OWN IN THEIR OWN IRA. WHAT THIS BILL DOES IS REDUCE THE MINNESOTA INCOME TAX. YOU COULD CONCEIVER I SUPPOSE THAT MAY LEAD SOMEBODY TO MISTAKENLY NOT CONTRIBUTE AS MUCH TO THE IRA OR 40 1K. NOW THEY HAVE MORE DIZ POSABLE INCOME AND MAY INCREASE THE CUNT DUGZ SO HAVE MORE RETIREMENT SECURITY SO I DON’T THINK THIS REALLY PROBABLY WILL EFFECT VERY MUCH THE RETIREMENT.>>THAT’S WHY I RAISE THE QUESTION IF ANYBODY LOOKED AT THAT ASPECT; I HAVE TO THINK THAT THROUGH; SOCIAL SECURITY IS BASED ON IN PART YOUR BENEFITS ON YOUR INCOME; SO DEPENDING HOW THAT INCOME IS CALCULATED IS MY POINT AND I DONT WANT TO BELABOR THE QUESTION; THE QUESTION IS WOULD THERE BE A IMPACT ON RETIREMENT SOME OCCUPATIONS.>>MR. CHAIRMAN AND REPRESENTATIVE CARLSON; THAT WE CAN RESPOND MORE DIRECTLY TO BECAUSE THIS BILL SIMPLY EXEMPTS THE STATE INCOME TAX. THE FICA TAX DETERMINES WHAT YOUR SOCIAL SECURITY YOUR AME IS; WILL BE UNEFFECTED BY THIS AND SO THE FICA TAX IS STILL PAID AND BE IN YOUR SOCIAL SECURITY EARNINGS RECORD AND THESE TIPPED EMPLOYEES WILL GET THE SAME SOCIAL SECURITY BENEFITS.>>THAT CONSIDERS THE QUESTION THEN. THAT WOULD ANSWER MY CONCERN THAT IT IS NOT A NEGATIVE IMPACT ON RETIREMENT. THANK YOU.>>CHAIR: I THINK WE GOT THIS. THANK YOU MR. COMINGS. YOU WANT TOWRAP IT UP CHAIR DRAZKOWSKI?>>REPRESENTATIVE DRAZKOWSKI: GREAT BILL AND AMOUNTS TO ABOUT 10 PERCENT OF THE CURRENT BIIN NM PROJECTED COLLECTING PEOPLES MONEY AND IMPACT PEOPLE WHO WORK VERY HARD AND WE COULD PROVIDE ADDITIONAL INCENTIVE BY LETTING THEM KEEP MORE OF THE MONEY.>>CHAIR: HOUSE FILE 2833 LAID OVER FOR POSSIBLE INCLUSION IN THE OMNIBUS TAX BILL. THANK YOU; CHAIR DRAZKOWSKI. ITEM NEXT; CHAIR GAROFALO MOVES HOUSE FILE 486.>>I HAVE A A2 AMENDMENT.>>CHAIR: MOVES THE A2 AMENDMENT. DISCUSSION? HEARING NONE; ALL IN FAVOR SAY AYE. OPPOSED? MOTION PREVAILS. WE HAVE HOUSE FILE 486 IN THE SHAPE THE AUTHOR WOULD LIKE AS AMENDED. I HAVE THREE TESTIFIERS CORY PAR NEL; AMBER [INAUDIBLE COMMENTS] DAVID [INAUDIBLE COMMENTS] ANYBODY ELSE WISH TO TESTIFY ON BEHALF OF THE BILL? ANYBODY WITH CONCERNS? DOES THE DEPARTMENT WISH TO TESTIFY? THANK YOU MR. COMINGS. TO YOUR BILL.>>REPRESENTATIVE GAROFALO: HOUSE BILL 486 ALLOWS A BUSINESS THAT ARE LEGAL IN THE STATE OF MINNESOTA TO TAKE THE SAME TAX DEDUCTIONS ON THE STATE INCOME TAX AND BUSINESS TAX AS TO OTHER LAWFUL BUSINESSES IN THE STATE OF MINNESOTA. QUITE SIMPLY; IT MAKES SENSE IF YOU TAKE A LOOK AT WHAT IS HAPPENING FOR COST IMPOSED IN THE INDUSTRIES; AGAIN THIS INDUSTRY THE MEDICAL CANNABIS MARIJUANA INDUSTRY IS A LEGAL BUSINESS IN THE STATE OF MINNESOTA; AND ALLOWS THEM TO HAVE THE SAME DEDUCTIONS AS OTHER BUSINESSES. MR. CHAIRMAN AND MEMBERS I KNOW TODAY IS OUR STATE OPIOID DAY HERE AT THE CAPITAL. I THINK IT IS IMPORTANT TO POINT OUT MINNESOTA DEPARTMENT OF HEALTH LAST NIGHT RELEASED A STUDY EMBARGOED UNTIL 1 A.M. THAT SHOWS THE EFFECT MEDICAL MARIJUANA HAS HAD ON THOSE QUAL IFYING FOR THE CONDITION OF INTRACTABLE PAIN AND IT IS RIGHT HERE IN THE STAR TRIBUNE ON THE FRONT PAGE; YOU CAN READ ABOUT IT; AND WHAT IT SAYS IS THAT OVER 60 PERCENT OF THOSE PEOPLE WHO ARE TAKING MEDICAL MARIJUANA AS A ALTERNATIVE ARE ABLE TO ELIMINATE OR REDUCE THE OPIOID USEAGE; OVER 60 PERCENT. AS A POLICY OUTCOME; I DONT THINK THERE IS ANY REPUBLICANS OR DEMOCRATS LIBERAL OR CONSERVATIVE VIEW THAT AS ANYTHING OTHER THAN 100 PERCENT POSITIVE OUTCOME FOR THE STATE OF MINNESOTA; ESPECIALLY GIVEN THE DESTRUCTION WE SEE AS A RESULT OF OPIOID ABUSE IN THE STATE AND AROUND THE NATION. PRETTY CUT AND DRY BILL. I HAVE TESTIFIERS HERE FROM THE BUSINESSES TO TALK ABOUT THAT BUT I ASK FOR MEMBERS SUPPORT AND HAPPY TO STAND FOR QUESTIONS AT THE COMPLETION OF THEIR TESTIMONY.>>CHAIR: WHY DID YOU EMBARGO TILL 1 A.M.? IS THAT NORMAL?>>REPRESENTATIVE GAROFALO: I BELIEVE I GOT THE REPORT BECAUSE I’M ON THE MEDICAL MARIJUANA COUNCIL ANDSENT IT OUT AT 11 A.M. AND IT SAT TO 1 A.M. SO JUST REPEATING. I ENCOURAGE MEMBERS TO GET A HOLD AND READ IT. THE DATA IS OVERWHELMING; THE VAST MAJORITY-THOSE SUFFERING FROM PAIN DISCUSS THE FACT THEY ARE EXPERIENCING FAR MORE COMFORT; SLEEPING BETTER; THEY ARE LIVING A BETTER QUALITY OF LIFE AS A RESULT OF THIS SEEING DRAMATIC REDUCTION IN OPIOID USE.>>CHAIR: THANK YOU. CORY PAR NEL; CPA. PLEASE STATE YOUR NAME AND WHO YOU REPRESENT FOR THE RECORD; PLEASE SIR MPT>>THANK YOU MR. CHAIRMAN; REPRESENTATIVES; CORY PAR NEL A CPA OF [INAUDIBLE COMMENTS] IN ST. PAUL OVER 30 YEARS. ONE OF OUR CLIENTS WE WORK WITH IS MINNESOTA MEDICAL SOLUTIONS AND ONE THING IS THE STATE OF MINNESOTA DID PASS MEDICAL MARIJUANA; HOWEVER; THE FEDERAL GOVERNMENT CONTINUES TO SEE IT AS A SCHEDULE 1 CONTROLLED SUBSTANCE; SO WHAT THAT REALLY MEANS TO THE COMPANY IN MEETING ITS FILING REQUIREMENTS IS A 280E LIMITATION ON DEDUCTION OF EXPENSES. FOR EXAMPLE; THEY ARE NOT ALLOWED TO DEDUCT PHARMACEUTICAL SALARIES; DISPENSARY RENT; DISPENSARY UTILITIES; AND OTHER GENERAL OPERATING EXPENSE. THE ONLY THING THEY ARE ALLOWED TO DEDUCT IS COST OF SALES. THAT IS WHAT I HAVE AT THIS TIME. THANK YOU.>>CHAIR: ANY QUESTIONS FOR MR. PAR NEL? THANK YOU. I HAVE NEXT AMBER [INAUDIBLE COMMENTS] MINNESOTA MEDICAL SOLUTIONS. STATE YOUR NAME I QUHOO YOU REPRESENT FOR THE RECORD.>>GOOD MORNING AND THANK YOU CHAIRMAN AND REPRESENTATIVES PROVIDING THE OPPORTUNITY TO OFFER THIS TESTIMONY. MY NAME IS AMBER [INAUDIBLE COMMENTS] I AM THE CHIEF FINANCIAL OFFICER FOR MINNESOTA MEDICAL SOLUTIONS. ONE THE TWO LICENSED MEDICAL CANNABIS MANUFACTURERS IN THE STATE OF MINNESOTA. MY PROFESSIONAL BACKGROUND IS BANKING AND BEEN INVOLVED IN FINANCIAL MATTERS FOR MIN MED INCLUDING TAXATION AND ODD TD SINCE INCEPTION. MINNESOTA MEDICAL SOLUTIONS IS PROUD TO SEE THE MINNESOTA MEDICAL PROGRAM CONTINUE TO GROW AND VERY ENCOURAGEED BY THE NUMBER OF CHRONIC PAIN PATIENTS WHO CAN REDUCE OR DISCONTINUE USE OF DANGEROUS AND ADDICTIVE OPIOID MEDICATIONS BY SWITCHING TO CAN ABOUT MEDICATION. THE COST REMAINS A TOP CONCERN BY THE PATIENTS ACROSS THE STATE AND FOR MANY MINNESOTANS OUR MEDICATION SIMPLY ARE TOO EXPENSIVE DESPITE TRYING TO KEEP THEM AFFORDABLE. THE REASON FOR THE COST ARE HIGH INCLUDING THE FACT HEALTH INSURANCE DOESN’T COVER THE COST OF MEDICAL CANNABIS SO ALL OUR PATIENTS MUST COVER THE FULL COST OF THE PRODUCTS OUT OF POCKET. MORE OVER; WHILE MINNESOTA MEDICAL CANNABIS PROGRAM IS GROWING; THE RELATIVELY LOW NUMBER OF ENROLLED PATIENTS MAKES IT DIFFICULT FOR US OPERATORS TO ACHIEVE ECONOMY OF SCALE AND PRODUCTION. IT SHOULD BE NOTED CANNABIS MANUFACTURER IN THE STATE GENERATED A PROFIT AND SUFFERED SUBSTANTIAL LOSS. THERE IS ANOTHER LAY TOOR THE COST EQUATION; THE VERY UNUSUAL TAX TREATMENT OF MEDICAL TREATMENT MANUFACTURERS IN MINNESOTA; THE FEDERAL TAX REGULATION PREVENT DETUCKTING EXPENSE FROM INCOME ACCEPT THOSE CONSIDERED COST OF GOODS SOLD. WE ARE NOT ABLE TO DETUCKT THE STANDARD EXPENSES THAT THOSE IN EVERY OTHER INDUSTRY CAN LIKE RENT OR MARKETING AND CERTAIN PAY ROLL EXPENSES. THIS CRUMATICICALLY DRIVES UP OUR COMBINED STATE AND FEDERAL TAXATION RATES. IN FACT; OUR TAX RATE IS NEARLY 70 PERCENT. OUR TAX RATE IS NEARLY 70 PERCENT. THIS IS BY FAR THE HIGHEST TAX RATE THAT ANY MINNESOTA CORPORATION PAYS AND ENOUGH TO CAUSE ANY BUSINESS TO SHUT ITS DOORS. AS CAN BE SPECTED WE ARE FORCED TO PASS THE COST OF THESE TAXES ON TO OUR PATIENTS MAKING MINNESOTA MEDICAL CANNABIS PRICES AMONG SOME THE HIGHEST IN THE NATION. WHILE THE MINNESOTA LEGISLATURE CANNOT CHANGE FEDERAL TAX LAW IT DOES HAVE THE AUTHORITY TO [INAUDIBLE COMMENTS] TAX LAW AND WE ARE HOPEFUL THAT OUR RELATIVELY STRAIGHT FORWARD CHANGE IN MINNESOTA LAW WILL ALLOW US TO DEDUCT STANDARD BUSINESS EXPENSE FROM THE MINNESOTA STATE CORPORATE TAX RESULTING IN SAVE FRGZ THE COMPANY SIMPLY PUT SAVINGS ON THE TAX BILL TRANSLATES TO SAVINGS FOR OUR PATIENTS. TO BE CLEAR WE ARE NOT ASKING FOR SPECIAL TREATMENT HEREX JUST STANDARD TREATMENT AT THE STATE LEGAL BUSINESS OPERATING IN THE STATE OF MINNESOTA. WE ARE NOT ASKING TO SET UP A PRECEDENT OF THE FIRST STATE [INAUDIBLE COMMENTS] OTHER STATES DO ALLOW FOR THE MEDICINAL USE OF CANNABIS HAVE SET UP AND TAKEN THESE STEPS AND WE ARE HOPEFUL MORE STATES TACKLE THE ISSUE AND THERE WILL BE CHANGE FOR THE FEDERAL TAX CODE. I LIKE TO MAKE ONE ADDITIONAL COMMENT; TODAY IS OPIOID DAY AND FAMILIES WHO LOST LOVED ONES TO OPIOID ADDICTION AND OVERDOSES ARE HERE TODAY TO TALK WITH THEIR LEGISLATURES ABOUT THE NEED FOR MINNESOTA TO TAKE ACTION TO ADDRESS THIS CRISIS. MEDICAL CANNABIS CAN BE A PART OF THAT SOLUTION TO OPIOIDS; CHRONIC PAIN WAS ADDED AS A QUALIFYING CONDITION. AUGUST 2016 AND SINCE THEN WE SERVED THOUSANDS OF PATIENTS FROM ACROSS THE STATE SEEKING A ALTERNATIVE TO THE ADDICTIVE AND DANGEROUS OPIOIDS THEY ARE USING. SEEING PATIENTS ARE VERY AWARE THE RINGES THEY TAKE BY USING HIGHLY ADDICTIVE MEDICATIONS BUT OFTEN HAVE NO ALTURN TRFBS TILL FOU AND AS I SAID EARLIER WE ARE ENCOURAGED BY THE NUMBER OF CHRONIC PAIN PATIENTS SEEK AGOPIOID ALTERNATIVE. ABOUT 2/3 OF THE PAIN PATIENTS HAVE REDUCED THE OPIOID MEDICATION OR STOPPED ALL TOGETHER. PASSAGE OF THIS LEGISLATION WOULD HELP REDUCE OUR COST TO THE PATIENTS. IT WOULD BE A MAJOR STEP FORWARD ADDRESSING THE OPIOID ADDICTION. THANK YOU FOR ALLOWING ME TO TESTIFY AND HAPPY TO ANSWER QUESTIONS REGARDING THE 280E TAX ISSUE AT HAND.>>CHAIR: ANY QUESTIONS FOR MRS. [INAUDIBLE COMMENTS] THANK YOU VERY MUCH. WE NOW GO TO MR. DAVE SAGE. STATE YOUR NAME AND WHO YOU REPRESENT FOR THE RECORD.>>GOOD MORNING MR. CHAIRMAN; COMMITTEE MEMBERS; MY NAME IS DAVE SAGE; CFO OF [INAUDIBLE COMMENTS] LABS. I’LL KEEP THIS VERY SHORT. WE 100 PERCENT AGREE WITH MY COLLEAGUE AND LIKE TO BE TREAT TD AS ANY OTHER BUSINESS AND AVOID HAVING TO GIVE OUR INVESTORS A TAX BILL AT THE SAME TIME WE ARE LOSING MONEY. THAT’S ALL I HAVE TO SAY.>>CHAIR: QUESTIONS FOR MR. SAGE? OKAY. IF YOU LIKE TO WRAP IT UP>>CHAIR MARK MAR QURT: MEDICAL CANNABIS IS LEGAL IN MINNESOTA BUT STILL A VIOLATION OF FEDERAL LAW AND WE KNOW ARTICLE 6 OF IF CONSTITUTION SUPREMACY CLAUSE IS FEDERAL LAW STILL TRUMPS STATE LAW AND PRESIDENT TRUMPS ADMINIVATION IS TAKING A HANDS ON APPROACH TO THIS REGARDING THE STATES THAT HAVE LEGALIZED THIS AND RECREATIONAL MARIJUANA COMPARED TO PRESIDENT OBAMAS ADMINISTRATION NAT HAD A HANDS OFF. I KNESS THE QUESTION IS; DO WE HAVE ANY OTHER CREDIT OR DEDUCTION OR TAX CODE TOWARDS OR BENEFITING AN ACTIVITY THAT IS A VIOLATION OF FEDERAL LAW?>>MR. MICHAEL: MR. CHAIRMAN; NOT THAT I’M AWARE OF. THE ONE THING I WOULD SAY THOUGH IS THAT THIS 280E PROVISION IS A UNIQUE UNUSUAL PROVISION. IT MIGHT BE USEFUL FOR PEEP TOOL UNDERSTAND THE HISTORY HOW THAT CAME ABOUT AND THAT’S ESSENTIALLY THERE WAS A TAX COURT CASE THE IRS LOST BACK IN THE LATE 70’S OR EARLY 80’S WHERE NOT SURE IT WAS A SOME SORT OF ILLEGAL DRUG BUSINESS THAT THEY ASSESS TAX ON AND THE TAXPAYER IN THAT CASE SAID WELL; I’M ENTITLED TO DEDUCT MY BUSINESS EXPENSES AND THE TAX COURT AGRUD AND CONGRESS WAS OUTRAGED AND ENACTED 280E SO THIS CATEGORY OF ILLEGAL ACTIVITY IS TREATED DIFFERENTLY IN SOME WAYS THAN OTHER ILLEGAL ACTIVITY IN THE SENSE THAT I THINK IF YOU ARE IN LIKE BOOK MAKING OR SOMETHING LIKE THAT YOU ARE ALLOWED TO DEDUCT YOUR BUSINESS EXPENSES BUT NOT THESE FOLKS. IT IS A VERY QUARKY KIND ORPHAREA. MINNESOTA ALSO HAS THIS CONTROLLED SUBSTANCE TAX ENACTED IN RESPONSE TO THE LATMER TAX STUDY COMMISSION FOR A WHILE WE WERE COLLECTING REVENUES UNDER THAT AND SAYS WE’LL IMPOSE A TAX ON DEALINGS IN THESE THINGS SO THIS IS A VERY QUARKY AREA.>>CHAIR MARQUART: IT IS A CONCERN FOR ME.>>CHAIR: QUESTIONS FOR THE AUTHOR OR TESTIFIER?>>CHAIR GAROFALO: I THINK THIS IS A COMMON SENSE THING WE CAN DO. IF ANY MEMBERS HAVE CONCERNS PLEASE FEEL FREE TO REACH OUT TO ME. HAPPY TO WORK WITH YOU ON THIS BUT THINK THIS IS A WAY TO PROVIDE MORE COMPASSIONATE CARE AND DO IT IN A WAY SIMPLY APPLY-IT IS A TAX CONFORMITY ISSUE; MR. CHAIRMAN. [LAUGHTER]. CONFORMITY TO ME.>>CHAIR: HOUSE FILE 486 LAID OVER FOR POSSIBLE INCLUSION IN THE OMNIBUS TAX BILL. FOR THAT MEMBERS; THANK YOU VERY MUCH. LOT OF GOOD TESTIMONY TODAY. LOOK FOR YOUR E-MAILS TO SEE WHAT WE ARE DOING NEXT WEEK TUESDAY; WEDNESDAY; THURSDAY. WITH THAT BEING SAID; GOOD GOVERNMENT ALL THE TIMEMENT WE ARE ADJOURNED. [MEETING ADJOURNED]

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