Minnesota Senate Bill SF3931

Minnesota 2025-2026 Regular Session

• Introduced: 2/26/26
• Refer: 2/26/26

Caption

Withholding of federal income tax from state employee pay prohibition

Summary

SF3931 would prohibit the Minnesota commissioner of management and budget, and any state agency that pays employees directly, from withholding or remitting federal income tax from state employee pay. The bill adds a new subdivision to Minnesota Statutes section 290.92 to bar state payroll systems from making federal income tax deductions for state employees, and it makes the change effective the day after final enactment. The bill also repeals Minnesota Statutes section 16A.13, which currently authorizes the state to act as a federal tax withholding agent for state employee wages. Under current law, the commissioner is the custodian of withheld federal tax funds, may cooperate with the United States as an agent for collection, must process deductions and remittances, and is supported by an appropriation to carry out that obligation. SF3931 would eliminate that statutory framework for state employee payroll withholding.

Impact

If enacted, the bill would remove the state’s legal authority and obligation to withhold federal income tax from the pay of Minnesota state employees. It would amend the state tax code and repeal the existing payroll withholding statute, affecting the Department of Management and Budget, state agencies that run their own payroll, and state employees whose paychecks currently have federal withholding processed through state payroll systems. The bill would also effectively end the state’s role as a collection agent for federal income tax on state employee wages under Minnesota law.

Sentiment

Based on the available record, there is no committee transcript or vote history showing debate, amendment activity, or a recorded position from legislators. The bill’s title and text indicate a clear policy change, but the provided materials do not show broader support or opposition. As a result, the overall sentiment cannot be measured from discussion, though the proposal appears to be a targeted and potentially controversial change because it would alter routine payroll tax withholding for state workers.

Contention

The main point of contention is likely the bill’s departure from standard payroll administration: it would stop state agencies from withholding federal income tax from employee pay, which conflicts with the current statutory framework that treats the state as a federal withholding agent. Potential concerns would center on payroll compliance, employee tax obligations, administrative burden, and whether the state can or should refuse to perform a function tied to federal tax collection. No specific opposing or supporting arguments are documented in the provided committee materials, so any contention is inferred from the bill’s substance rather than recorded debate.