HF 851

as introduced - 87th Legislature (2011 - 2012) Posted on 03/03/2011 11:35am

A bill for an act
relating to taxation; individual income; providing an exemption for certain
deferred wages; amending Minnesota Statutes 2010, section 290.17, subdivision
2.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 290.17, subdivision 2, is amended to read:

Subd. 2.

Income not derived from conduct of a trade or business.

The income of
a taxpayer subject to the allocation rules that is not derived from the conduct of a trade or
business must be assigned in accordance with paragraphs (a) to (f):

(a)(1) Subject to paragraphs (a)(2) deleted text begin and deleted text end new text begin , new text end (a)(3), new text begin and (a)(4), new text end income from wages as
defined in section 3401(a) and (f) of the Internal Revenue Code is assigned to this state if,
and to the extent that, the work of the employee is performed within it; all other income
from such sources is treated as income from sources without this state.

Severance pay shall be considered income from labor or personal or professional
services.

(2) In the case of an individual who is a nonresident of Minnesota and who is an
athlete or entertainer, income from compensation for labor or personal services performed
within this state shall be determined in the following manner:

(i) The amount of income to be assigned to Minnesota for an individual who is a
nonresident salaried athletic team employee shall be determined by using a fraction in
which the denominator contains the total number of days in which the individual is under
a duty to perform for the employer, and the numerator is the total number of those days
spent in Minnesota. For purposes of this paragraph, off-season training activities, unless
conducted at the team's facilities as part of a team imposed program, are not included in
the total number of duty days. Bonuses earned as a result of play during the regular season
or for participation in championship, play-off, or all-star games must be allocated under
the formula. Signing bonuses are not subject to allocation under the formula if they are
not conditional on playing any games for the team, are payable separately from any other
compensation, and are nonrefundable; and

(ii) The amount of income to be assigned to Minnesota for an individual who is a
nonresident, and who is an athlete or entertainer not listed in clause (i), for that person's
athletic or entertainment performance in Minnesota shall be determined by assigning to
this state all income from performances or athletic contests in this state.

(3) For purposes of this section, amounts received by a nonresident as "retirement
income" as defined in section (b)(1) of the State Income Taxation of Pension Income
Act, Public Law 104-95, are not considered income derived from carrying on a trade
or business or from wages or other compensation for work an employee performed in
Minnesota, and are not taxable under this chapter.

new text begin (4) Wages, otherwise assigned to this state under clause (1) and not qualifying under
clause (3), are not taxable under this chapter if the following conditions are met:
new text end

new text begin (i) the recipient was not a resident of this state for any part of the taxable year in
which the wages were received; and
new text end

new text begin (ii) the wages are for work performed while the recipient was a resident of this state.
new text end

(b) Income or gains from tangible property located in this state that is not employed
in the business of the recipient of the income or gains must be assigned to this state.

(c) Income or gains from intangible personal property not employed in the business
of the recipient of the income or gains must be assigned to this state if the recipient of the
income or gains is a resident of this state or is a resident trust or estate.

Gain on the sale of a partnership interest is allocable to this state in the ratio of the
original cost of partnership tangible property in this state to the original cost of partnership
tangible property everywhere, determined at the time of the sale. If more than 50 percent
of the value of the partnership's assets consists of intangibles, gain or loss from the sale
of the partnership interest is allocated to this state in accordance with the sales factor of
the partnership for its first full tax period immediately preceding the tax period of the
partnership during which the partnership interest was sold.

Gain on the sale of an interest in a single member limited liability company that
is disregarded for federal income tax purposes is allocable to this state as if the single
member limited liability company did not exist and the assets of the limited liability
company are personally owned by the sole member.

Gain on the sale of goodwill or income from a covenant not to compete that is
connected with a business operating all or partially in Minnesota is allocated to this state
to the extent that the income from the business in the year preceding the year of sale was
assignable to Minnesota under subdivision 3.

When an employer pays an employee for a covenant not to compete, the income
allocated to this state is in the ratio of the employee's service in Minnesota in the calendar
year preceding leaving the employment of the employer over the total services performed
by the employee for the employer in that year.

(d) Income from winnings on a bet made by an individual while in Minnesota is
assigned to this state. In this paragraph, "bet" has the meaning given in section 609.75,
subdivision 2, as limited by section 609.75, subdivision 3, clauses (1), (2), and (3).

(e) All items of gross income not covered in paragraphs (a) to (d) and not part of the
taxpayer's income from a trade or business shall be assigned to the taxpayer's domicile.

(f) For the purposes of this section, working as an employee shall not be considered
to be conducting a trade or business.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective for taxable years beginning after
December 31, 2010.
new text end