While negotiations are still ongoing to reestablish tax reciprocity between Wisconsin and Minnesota, officials of both states are looking to settle the issue by 2014 as others claim a deal will not come through for the 2013 year.
Minnesota Department of Revenue Commissioner Myron Frans said negotiations are still ongoing and both sides are hoping to get a solution by the Oct. 1 deadline for the 2013 fiscal year.
“We are always open minded and we’re both interested in [having reciprocity in place] for 2013,” Frans said, “Both sides are trying.”
Wisconsin Department of Revenue Secretary Richard G. Chandler said in a statement that efforts by both sides to restore the reciprocity agreement former Minnesota Gov. Tim Pawlenty ended in 2009 after Wisconsin did not accelerate its compensation payments to Minnesota.
The agreement had allowed those who lived in one state and worked in another to file income tax returns in just their home state, rather than filing in both states.
Gov. Scott Walker has been working with current Minnesota Gov. Mark Dayton, according to Chandler’s statement. In March and April 2012, Wisconsin made offers to make accelerated payments to Minnesota and to use a new study to calculate the size of each one.
However, Chandler’s statement said Wisconsin provides its residents with a tax credit for taxes paid to another state to avoid double taxation, while Minnesota limits its tax credit for taxes paid to another state. He said this gave Minnesota a tax windfall when reciprocity ended, and Minnesota is now asking Wisconsin to supplement that windfall.
“Making such a payment, estimated to be as much as $15 million by Minnesota, is not possible under current law,” the statement said. “Furthermore, it is unreasonable to ask Wisconsin taxpayers to pay to reverse a tax increase Minnesota imposed on its own residents.”
Frans said both departments are only using estimates and they are waiting on reports of the actual fiscal impact, which will be available in spring of 2013. He said if an agreement does not come through by Oct. 1, both states will continue to negotiate for the 2014 year.
Rep. Chris Danou, D-Trempealeau, said while he is still hopeful that an agreement may make it through by Oct. 1, he thinks a decision between the two states would be unlikely.
He said the issue should be focused more on Minnesota coming through and changing its laws rather than Wisconsin, since more Wisconsinites work in Minnesota than Minnesotans work in Wisconsin.
According to Chandler’s statement, over 57,000 Wisconsin residents work in Minnesota and over 22,000 Minnesota residents work in Wisconsin.
Rep. Dean Knudson, R-Hudson, said in a statement that negotiations appear to have reached an impasse even though Wisconsin agreed to Minnesota’s original conditions in the agreement.
“However, [Frans] now insists on a new payment from Wisconsin, one that is incompatible with Wisconsin state law and inconsistent with Wisconsin’s reciprocity agreements with other states,” Knudson said in the statement. “Along with taxpayers on both sides of the border, I will be bitterly disappointed if another year goes by without a new agreement.”
He said his commitment to reaching a new agreement remains strong, even if an agreement will have to wait until 2014.
