Minnesota's precarious cash flow problem is prompting the Department of Revenue to delay corporate and sales tax refunds for the second time in six months, department officials disclosed Thursday.
The state is currently delaying $128 million in corporate tax refunds to 461 companies and $11.9 million in sales tax refunds to about 350 to 400 businesses until late December. However, the Revenue Department is not notifying the firms unless companies specifically request a status update on their tax refunds.
To date, only the Star Tribune and a few other companies have been told that their refunds will be delayed, state officials said. A spokesman for the Minnesota Chamber of Commerce said its members were not aware of this delay.
The reason for the delays? Minnesota's revenue collections are $200 million below forecast since July 1.
"We had a conversation with Minnesota Management and Budget (MMB) two weeks ago and they raised some concerns about the cash flow situation for the state. ... So they asked us to assist them by [temporarily] holding back refunds," said Ward Einess, commissioner for the Department of Revenue. "MMB is constantly evaluating the situation so that the hold is no longer than necessary."
MMB is expected to update its October revenue receipts Tuesday, "but I am not sure that the MMB is too optimistic about that even," Einess said.
The tax refund delays are expected to be "short," maybe just a few weeks. The state must pay corporations interest on any delayed tax refunds after 90 days and "we don't expect to have to pay any," Einess said. He noted that November is typically one of the more challenging months for the state because of revenue shortfalls and steady expenses.
The state has delayed refunds in the past, as recently as the spring. That delay was so brief that state officials did not receive phone calls or complaints from corporations, officials said. This time might turn out to be just as short lived and uneventful, said Einess, noting the MMB can remove the delay at any time.
