The Minnesota Legislature will return from recess on Monday, with a full agenda and just four weeks remaining before the constitutional adjournment date on May 19^th.  Although several omnibus bills have been introduced and heard in both the House and the Senate, key differences still need to be reconciled, and lawmakers have yet to agree on final spending targets. In the weeks ahead, expect a flurry of activity as legislators work to pass omnibus bills off the floor and negotiate final agreements between the House, Senate, and Governor.

NFIB will continue to monitor legislation to assess its impact on small businesses and oppose efforts that hinder the ability of small business owners to run and grow their businesses.

House of Representatives Officially Tied
Following the special election on March 11^th, the House of Representatives is now evenly split. This outcome triggered a pre-negotiated power-sharing agreement between House Republicans and House Democrats (DFL). While Republicans will retain the Speakership for the next two years, committees are now co-chaired by members of both parties. With the exception of a GOP-controlled committee on Fraud Prevention and State Agency Oversight, all committees are evenly divided between DFL and GOP members, meaning bipartisan support is required to advance any bill. As the Legislature approaches its April 11^th deadline for moving budget bills out of committee, the full impact of this power-sharing structure will continue to unfold.

5^th Tier Income Tax/Corporate Tax Bill Hearing
The Senate Taxes Committee recently considered SF 2290, a bill that proposes two significant tax increases: (1) the creation of a 5^th-tier income tax bracket at 12.45% and (2) an increase in the corporate franchise tax to 12.45%. NFIB testified in opposition, warning of the financial burden that these higher rates would place on small businesses.

Many small businesses operate as pass-through entities, meaning their business income is taxed at the individual income rates. The introduction of a 5^th-tier income tax rate of 12.45% would limit their ability to reinvest in their operations, expand, and hire additional staff. According to data from the Tax Foundation, the implementation of a top marginal tax rate of 12.45% would cement Minnesota’s position among the states with the highest tax rates in the nation, second only to California.

The proposed rate increase in the corporate franchise tax would further hinder job creation and economic growth within the state. According to U.S. Census data, in Minnesota, 65% of corporations employ fewer than 20 employees and nearly 80% employ fewer than 100 employees. According to data from the Tax Foundation, implementing a 12.45% corporate franchise tax rate would make Minnesota’s corporate tax rate the highest in the country, negatively impacting businesses across the state.

NFIB Opposes Proposal to Expand Sales Tax
The Senate Taxes Committee also recently held a hearing on Governor Walz’s proposal to expand the state sales tax. While the proposal would lower the state’s general sales tax rate by 0.075 percent (a savings of 75 cents on $1,000 of taxable purchases), it would expand the state sales tax to include legal, accounting, and financial services. NFIB, alongside other affected trade groups, strongly opposed the measure, warning of its potential impact on businesses and consumers. This expansion would impose an additional $466 million burden on consumers over the next four years and could drive Minnesotans to seek out-of-state providers for these taxed services, ultimately disadvantaging local businesses. Here is an opposition letter that NFIB signed onto with other stakeholders.

NFIB Opposes Efforts to Expand Unemployment to Striking Workers
The House Workforce, Labor, and Economic Development Committee held a hearing on HF 107, which would make striking workers eligible for unemployment insurance benefits almost immediately. NFIB opposed this bill, arguing that this expansion is fundamentally unfair to small businesses and jeopardizes the financial stability of Minnesota’s unemployment insurance system. Multiple states, including California, have rejected similar proposals in recent years based on the projected negative impact that such an expansion would have on the Unemployment Insurance Trust Funds.

New Employment Mandate Bills
Several bills have been introduced that would impose additional mandates on employer.

1. Holiday Pay Requirement – SF 2532 would require employers to pay 1.5 times the regular rate of pay to employees who work on a state-recognized holiday. These holidays include: New Years Day, Martin Luther King Jr. Day, President’s Day, Memorial Day, Independence Day, Labor Day, Indigenous Peoples Day, Juneteenth, Veterans Day, Thanksgiving Day, and Christmas Day. This mandate would apply to all employers, with no exceptions for small businesses. There has been no hearing on this bill yet.
2. Mandatory Break Time Changes – SF 2373 includes several provisions, including a requirement that employers provide (1) 15-minute paid breaks for every 4 hours worked, and (2) a 30-minute unpaid lunch break for employees working for six or more consecutive hours. NFIB submitted written comments expressing our concerns, especially regarding the bill’s penalties, which do not differentiate between willful violations and honest mistakes. Although clarification was provided that employers would retain authority to set break times as specified in company handbooks or polices, we remain concerned about the potential consequences for inadvertent non-compliance.
3. Job Misclassification Prohibition – SF 2153 would prohibit employers from misclassifying an employee’s job title or category in a way that misrepresents the employee’s “experience or actual job duties and responsibilities.” This prohibition would apply if the employer has a formal job classification and compensation plan. It could create significant complications for small employers who regularly assign employees to different roles based on business needs. No hearing has been scheduled for this bill yet.

4. Modifications to Job Posting Requirements – SF 2235 would require employers to disclose whether a health plan offered in a job posting complies with certain cost-sharing limits for prescription drugs to treat chronic diseases. This bill is primarily driven by concerns about coverage for diabetes medications, but it is unclear how the requirement would be implemented in practice and what level of detail employers would need to provide in the job posting.

Internet Tax Bill
HF 974/SF 2045 has been reintroduced, which would allow cities to require broadband providers to negotiate complex new franchise agreements and impose up to an 8% tax on internet and broadband-enabled services. NFIB opposed this legislation in the past session and continues to oppose this bill, as it would increase costs for businesses and consumers.

Join us on Tuesday, April 29th at noon CT for a FREE Minnesota legislative session update webinar! NFIB State Director Jon Boesche will give a rundown of key issues such as reforming or delaying Paid Family Medical Leave, Earned Sick and Safe Time, projected $6 billion budget deficit in 2028 and the budget battle. SIGN UP HERE.