HF3909

Purpose

This bill would create a new state tax on private detention facilities in Minnesota. The tax is based on the facilities’ gross revenues and would start applying to revenues received after December 31, 2026. The money collected would go to the state’s general fund.

Key Definitions

• Detention facility: A place where people are incarcerated or involuntarily confined for a court-ordered punishment, or held while awaiting a trial or hearing.
• Private detention facility: A detention facility run by a private for-profit company under a contract with a government entity.
• Gross revenues: All money or other value received by the private detention facility for detention-related services in Minnesota.
• Exclusions: The term does not include privately owned residential facilities such as halfway houses, group homes, work release centers, or treatment facilities intended for care, custody, and rehabilitation of released inmates.

Main Provisions

• Tax rate: Beginning with gross revenues received after December 31, 2026, private detention facilities would owe a tax equal to 50% of their gross revenues.
• Tax credit for other state taxes: If a private detention facility pays taxes on the same gross revenues in another state, Minnesota would give a credit for the lesser of (a) the other jurisdiction’s tax actually paid, or (b) the Minnesota tax that would be due on that revenue.
• Administration and enforcement: The tax would follow the existing administration rules for similar Minnesota taxes (audit, assessment, penalties, collection, etc.).
• Returns and payment: Facilities must file a tax return and pay the tax using the same filing cycle and due dates as certain other Minnesota taxes (chapter 297A).
• Revenue deposit: All tax revenue, including any penalties and interest, would be deposited into Minnesota’s general fund.

Significance and Changes to Law

• New tax on private detention facilities: Introduces a 50% tax on gross revenues of private, for-profit detention facilities operating under government contracts.
• Scope and exclusions clarified: Limits applicability to private facilities and excludes certain privately owned residential facilities (e.g., halfway houses, group homes, work release centers, treatment facilities).
• Revenue use: Directs tax receipts to the state’s general fund, affecting state budgeting and revenue streams.
• Compliance alignment: Uses existing Minnesota tax administration processes for enforcement and collection, with parallel filing requirements to other taxes.

Relevant Terms - private detention facility - detention facility - gross revenues - for-profit - governmental entity - private nongovernmental entity - tax credit - general fund - administration - returns - December 31, 2026 - 50 percent