SF5032

Purpose

This bill creates a new tax aimed at people or organizations that obtain money through fraud in state programs or appropriations. The idea is to punish fraud more directly and raise funds to support tax relief programs.

Main provisions

• Tax amount and who pays
  • A tax equal to 100% of the amount obtained by fraud is imposed.
  • Applies to:
  • Individuals or organizations convicted by a state or federal court of fraud.
  • Individuals or organizations the commissioner determines have obtained money by fraud.
  • Individuals or organizations that receive compensation from someone described above for participating in the fraudulent activity.
  • Individuals or organizations that receive compensation from a described entity for participating in activity the commissioner has determined to be obtained by fraud.
• Definition of fraud
  • Fraud means the intentional use of deceit or dishonest means to obtain state money from a state program or appropriation.
  • Excludes refunds related to overpayment of taxes.
  • Applies regardless of whether a conviction occurred.
• Non-credit against other penalties
  • The 100% tax applies even if restitution or other penalties have been or will be paid.
• Role of the Commissioner of Revenue
  • The commissioner will investigate suspected fraud in coordination with federal, state, or local law enforcement (as applicable).
  • The commissioner will establish a schedule for payment and enforcement of the tax.
• Appeals
  • Appeals of the tax assessment follow the existing process described in section 270C.35.
• Deposit and use of funds
  • Money collected from the tax goes into a tax relief account.
  • Funds in the tax relief account must be used for income tax relief, property tax relief, or both, as determined by law.
  • The tax relief account is established within the state’s special revenue fund.

Effects on existing law

• Creates a new tax provision (within Minnesota Statutes chapter 295) for fraud-related gains.
• Connects to existing appeal procedures (270C.35) for dispute of tax assessments.
• Establishes a dedicated revenue stream (tax relief account) to support tax relief programs.

Potential implications and considerations

• This provision targets not only fraud convictions but also individuals or organizations the commissioner believes benefited from fraud and those who facilitate fraud.
• The tax is designed to be a deterrent and to fund tax relief rather than to serve as a penalty that reduces restitution.
• Enforcement and investigations would involve coordination with law enforcement agencies.
• The creation of a tax relief fund could influence how recovered fraud proceeds are allocated for taxpayer relief.

Relevant Terms fraud; deceit; dishonest means; state money; state program; appropriation; conviction; commissioner of revenue; compensation; participating; tax; tax relief account; special revenue fund; restitution; penalty; enforcement; investigation; appeals; 270C.35; income tax relief; property tax relief; fraud relief fund.