HF304 (Legislative Session 94 (2025-2026))
Motor Fuels tax indexed increases repealed.
Related bill: SF1747
AI Generated Summary
Purpose
- To change how motor fuels taxes are adjusted for inflation by repealing automatic indexed increases and setting new limits on how much rates can rise each year.
Main Provisions
- Gasoline excise tax rates (per gallon):
- E85: 17.75 cents
- M85: 14.25 cents
- All other gasoline: 25 cents
- Annual adjustment: On August 1 each year, the commissioner determines the tax rate for the next year (January 1 to December 31). The new rate is the current rate times (1 plus the percent increase in the Minnesota Highway Construction Cost Index for the reference year). The rate is rounded to the nearest tenth of a cent.
- Minimum rate guarantee: Each adjusted rate must not be lower than the base rate listed above.
- Cap on increases: Starting with the August 1, 2025 calculation, the percent change in each rate due to this adjustment may not exceed 3 percent per year.
- Definitions and reference year:
- Minnesota Highway Construction Cost Index is defined as determined by the commissioner of transportation.
- Reference year is the 12-month period ending June 30 two years before the calculation year.
How this Changes Existing Law
- Repeals the previous practice of automatic indexed increases tied to inflation and replaces it with a capped indexing mechanism. Rates can still adjust annually, but no more than 3 percent per year, and rates cannot drop below the listed base rates.
Practical Implications
- Gasoline taxes (including E85 and M85) will still adjust with the cost index, but must stay within a 3% annual cap and never fall below current base rates starting in 2025.
- The changes hinge on the Minnesota Highway Construction Cost Index and a defined reference year set by the Transportation Department.
Definitions of Key Terms from the Bill
- Gasoline excise tax
- E85
- M85
- All other gasoline
- Minnesota Highway Construction Cost Index
- Reference year
- Commissioner of transportation
- August 1 (annual rate determination date)
- 12-month period ending June 30
- Not lower than base rates
- Cap (three percent)
Relevant Terms - E85, M85, all other gasoline, gasoline excise tax, Minnesota Highway Construction Cost Index, reference year, August 1, 2025, three percent cap, 12-month period ending June 30, commissioner of transportation, rate of tax, current rate, base rate, rounded to nearest tenth of a cent.
Actions
| Date | Chamber | Where | Type | Name | Committee Name |
|---|---|---|---|---|---|
| February 10, 2025 | House | Action | Introduction and first reading, referred to | Transportation Finance and Policy |
Citations
[
{
"analysis": {
"added": [],
"removed": [
"Index-based increases to the motor fuels tax"
],
"summary": "Amends Minnesota Statutes 2024, section 296A.07, subdivision 3 to modify the gasoline excise tax structure and indexing provisions related to E85, M85, and all other gasoline.",
"modified": [
"Sets explicit tax rates for E85 (17.75 cents/gal), M85 (14.25 cents/gal), and all other gasoline (25 cents/gal).",
"Replaces automatic indexing with a rate adjustment mechanism tied to the Minnesota Highway Construction Cost Index and capped (not to exceed 3% annually, beginning August 1, 2025).",
"Defines the timing for rate recalculation (annual on August 1 for the upcoming 12-month period)."
]
},
"citation": "296A.07",
"subdivision": "subd. 3"
},
{
"analysis": {
"added": [],
"removed": [],
"summary": "Amends Minnesota Statutes 2024, section 296A.08, subdivision 2.",
"modified": []
},
"citation": "296A.08",
"subdivision": "subd. 2"
}
]Progress through the legislative process
In Committee