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SF3931 (Legislative Session 94 (2025-2026))

Withholding of federal income tax from state employee pay prohibition

Related bill: HF3612

AI Generated Summary

Purpose

  • This bill aims to change how federal income tax is handled for state employees by prohibiting the state from withholding federal income tax from state employee pay. It adds a new rule to existing tax law and repeals a separate provision.

Main Provisions

  • Add a new subdivision (Subd. 32) to Minnesota Statutes 2024 section 290.92 stating: No federal tax withholding for state employees.
  • When the commissioner of management and budget prepares state employee payroll under section 16A.17, or when the head of an agency pays employees directly, the state official must not withhold or remit federal income tax from the employees’ pay.
  • The bill also repeals Minnesota Statutes 2024 section 16A.13.1.5.

How It Changes Current Law

  • Current practice requires federal income tax to be withheld from most employee wages and remitted to the federal government. This bill would override that for state employees in specified payroll situations.
  • It removes the state’s obligation to withhold and send federal income tax from state employee wages and replaces or removes the cited provision in section 16A.13.1.5.
  • The change could shift tax handling to employees directly and may create conflicts with existing federal tax requirements.

Potential Implications and Considerations

  • Federal law requires withholding of federal income tax from wages; this change may raise questions about compliance with federal rules.
  • The bill does not specify how employees would handle paying their federal taxes directly to the IRS or how withholding would be managed otherwise.
  • Because this affects state payroll operations, it could impact budgeting, payroll processing, and compliance workflows within state agencies.

Administration and References

  • Key entities: commissioner of management and budget; head of an agency.
  • Relevant statutes: Minnesota Statutes 2024 section 290.92 (new Subd. 32); Minnesota Statutes 2024 section 16A.17; Minnesota Statutes 2024 section 16A.13.1.5 (repealed).

Effective Date

  • Not specified in the provided excerpt.

Relevant Terms - federal income tax withholding - state employee payroll - commissioner of management and budget (MMB) - section 16A.17 - head of an agency - Subd. 32 - Minnesota Statutes 2024 section 290.92 - Minnesota Statutes 2024 section 16A.13.1.5 - withhold or remit federal income tax - repeal - payroll administration

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 26, 2026SenateActionIntroduction and first reading
February 26, 2026SenateActionReferred toTaxes

Citations

 
[
  {
    "analysis": {
      "added": [
        "Subd.32 added to 290.92 establishing no federal income tax withholding for state employees."
      ],
      "removed": [],
      "summary": "This bill adds Subd.32 to Minnesota Statutes 2024 section 290.92 to prohibit withholding or remitting federal income tax from state employee pay.",
      "modified": []
    },
    "citation": "290.92",
    "subdivision": "Subd.32"
  },
  {
    "analysis": {
      "added": [],
      "removed": [
        "Minnesota Statutes 2024 section 16A.13.1.5 is repealed."
      ],
      "summary": "The bill repeals Minnesota Statutes 2024 section 16A.13.1.5.",
      "modified": []
    },
    "citation": "16A.13.1.5",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "The bill references Minnesota Statutes 2024 section 16A.17 regarding payroll procedures, indicating payroll may be prepared under this section or by the agency head.",
      "modified": [
        "References to 16A.17 are used for payroll context; no direct modification proposed."
      ]
    },
    "citation": "16A.17",
    "subdivision": ""
  }
]

Progress through the legislative process

17%
In Committee

Sponsors

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