Tax commissioner and staff outline local impacts of federal 'OB3' and rising rebate participation

Revenue analyst Shailen Heeb told the committee the department’s county‑level taxable sales and purchases dataset for calendar year 2025 is posted on the agency website and shows Cass County leading the state at about $3.6 billion in reported taxable sales. Heeb said retail trade was the largest industry sector in 2025 — roughly $9.3 billion, or just under 35% of total taxable sales and purchases — and highlighted counties with the largest year‑over‑year increases, including Divide (about +18.5%). He reminded members the figures are based on business permit location rather than destination‑based sourcing in all cases.

Tax Commissioner Brian Krashes explained how recent federal income tax changes (referred to in the meeting as "OB3") flow through North Dakota’s starting point of federal taxable income. He said some provisions made permanent at the federal level were already baked into the state baseline while other changes produce a near‑term state fiscal impact. "So these are the things that that were made permanent, following OB3," Krashes said, and described estimated state fiscal impacts: about $26–29 million on individual income tax in FY26 and a larger combined effect on businesses in the first two years, producing a combined FY26 impact in the tens of millions and a reduced impact thereafter under the 2025 baseline comparison.

Krashes also briefed members about the primary‑residence classification application count: as of noon on the day of the meeting the department had processed just over 154,000 applications, roughly 1,000 ahead of last year at the same point and on track to reach the low‑160,000s by the application deadline (the department will accept applications through April 1 per statute). He said participation rates have been high in prior years (above 90%) and that the larger rebate amount this year ($1,600, up from an earlier $500 expectation) likely increased take‑up.

Committee members pressed for follow‑up details — for example, Representative Hedlund asked whether the reported average oil price used in allocations reflected North Dakota's discounted rate, and Krashes confirmed that the department's reported number does reflect the North Dakota discounted price after transportation adjustments. Krashes said some items (like the percentage of seniors qualifying for the additional standard deduction) require additional file‑level analysis and can be provided later in the summer when more returns are processed.

Why it matters: changes in federal taxable income rules can materially shift state revenue baselines and influence budget decisions; the high participation rate in the property‑tax rebate program affects near‑term outlays the state must process.

The committee did not vote on tax legislation during the session; staff said the department will return updated detail as filings finalize.