$100 million conjunction causes legislative conundrum

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There are more than 117,000 words in the tax bill sitting on Gov. Mark Dayton's desk. But one of them could make all the difference.

A simple little "or" that should have been an "and" way down on page 120, line 26 has Dayton in a holding pattern and considering not signing the giant tax plan at all. He said lawmakers should correct it in a potential special session and, if not, he would have trouble signing off.

The section has to do with the taxes paid on pull tabs sold at bingo halls. Bingo halls were in line for a tax break expected to cost the state $1.5 million over the next three years. But bill writers mistakenly broadened the scope of the tax break to any place that sells pull tabs and occasionally conducts bingo.

How?

They used an "or" instead of an "and" in the revised definition of an eligible bingo hall. Here's the section with the "or" in bold.

120.20    Sec. 28. Minnesota Statutes 2014, section 349.12, is amended by adding a subdivision 120.21to read: 120.22    Subd. 4a. Bingo hall. (a) "Bingo hall" means the premises on which an organization 120.23licensed under this chapter regularly conducts bingo if: 120.24(1) more than 50 percent of the organization's gross receipts from lawful gambling 120.25in the prior calendar year were attributable to the conduct of bingo or the organization had 120.26no receipts from lawful gambling in that year; or 120.27(2) no other organization conducts lawful gambling on the premises. 120.28(b) For purposes of this subdivision, "bingo" does not include a linked bingo game 120.29as defined in this section. 120.30EFFECTIVE DATE.This section is effective July 1, 2016.

Any place that met the wider definition could qualify for a reduction in taxes on net receipts from the current 36 percent to the new 9 percent. And so statewide, that could have made the price tag balloon from the intended $1.5 million to $101 million.

Compounding the trouble is that a fraction of the taxes collected from charitable gambling go into a stadium fund to help cover the public's share of the soon-to-open U.S. Bank Stadium where the Vikings will play. Officials estimate that it would add up to $21 million per year not routed to the stadium account.

In turn, Minnesota Management and Budget Commissioner Myron Frans said he might have to authorize a 10 percent stadium suite rental tax and implement a new Minnesota Lottery game to make up the difference. Both were backup sources in the 2012 Vikings stadium legislation.

House Speaker Kurt Daudt, R-Zimmerman, and Senate Minority Leader David Hann, R-Eden Prairie, said a letter signed by top legislators spelling out the intent of the provision might be enough to remedy the problem.

"Whatever it was everybody agrees that it was a mistake. And it probably does change the intent of the language. We do believe you have to be creative in how you interpret it to get to what they're suggesting," Daudt said. "But we also know that folks who have an incentive and have attorneys can go to court to try to get it enacted to the letter of the law."

Dayton's top advisers weren't sure a letter would suffice.

"If the tax bill is signed with the error in it those new rates are in effective July 1 of 2016, and therefore the revenue will stop flowing into the stadium-related cost," Frans said. He didn't know how soon the fund would run into problems.

Revenue Commissioner Cynthia Bauerly said it was an unintended error discovered only after the Legislature adjourned. Agency officials had discovered other problems with the tax bill earlier, but those were spotted in time to pass follow-up legislation.

Dayton and leading lawmakers said they're not blaming bill drafters who were working around the clock as the session wound down. They said it was an unfortunate mistake but one that requires correcting.

"It's a $101 million consequence over the next three years so it's a very significant error," Dayton said. "It affects the balance sheet for the entire state budget."

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