HF4950

Purpose

• Establish a new tax on money obtained through fraud, with the goal of deterring fraud and raising funds for tax relief.
• Place the collected revenue into a dedicated tax relief account to support income and/or property tax relief.

Main Provisions

• Tax on amounts obtained through fraud: a 100% tax is imposed on the amount obtained by fraud by:
  • individuals or organizations convicted in state or federal court of fraud;
  • individuals or organizations that the commissioner determines have obtained fraud;
  • individuals or organizations that receive compensation from someone described above in exchange for participating in the fraudulent activity; and
  • individuals or organizations that receive compensation from someone described in the previous clause in exchange for participating in that activity.
• The tax applies regardless of any restitution or penalty already imposed or paid.
• Definitions: “fraud” means the intentional use of deceit or dishonest means to obtain state money from a state program or appropriation, excluding refunds for overpayment of taxes.
• Commissioner’s role: the state revenue commissioner, in consultation with appropriate law enforcement, must investigate suspected fraud and determine who owes the tax; the commissioner also sets the payment schedule and enforcement method.
• Appeals: any appeals of the tax assessment follow procedures in section 270C.35.
• Allocation of funds: money collected from the tax must be deposited into a tax relief account in the special revenue fund and used only for income or property tax relief, or both, as determined by law.

Definitions and Scope (Key Terms)

• Fraud: defined as intentional deceit to obtain state money, not counting tax overpayment refunds.
• Commissioner: Minnesota’s commissioner of revenue.
• Convicted of fraud: individuals or organizations with a state or federal court fraud conviction.
• Obtained by fraud: amounts identified by the commissioner as obtained through fraudulent activity.
• Compensation for participating: payments received to take part in fraudulent activity.
• Tax relief account: a dedicated fund to support tax relief programs.
• Special Revenue Fund: the broader fund where the tax relief account is housed.
• Restitution and penalties: the tax operates independently of any restitution or penalties already imposed.

Enforcement and Administration

• Investigation: the commissioner coordinates with federal, state, or local law enforcement to identify fraud.
• Payment schedule: the commissioner establishes when and how the tax must be paid.
• Appeals: governed by section 270C.35.

Revenue Allocation and Use

• All tax receipts go to the tax relief account.
• Funds are designated for income tax relief, property tax relief, or both.

Significance and Changes to Law

• New tax creating a 100% levy on fraud-derived funds, adding a dedicated mechanism to address fraud in state programs.
• Establishes a formal process for identifying liable parties, collecting the tax, and directing proceeds to tax relief programs.
• Clarifies that paying restitution or penalties does not reduce the amount of the new fraud tax.

Relevant Terms fraud; commissioner of revenue; tax relief account; income tax relief; property tax relief; special revenue fund; Minnesota Statutes Chapter 295; 270C.35; convicted of fraud; obtained by fraud; compensation; restitution; penalties; investigation; enforcement; payment schedule; appeals; state program or appropriation; overpayment refunds.